The Spanish Treasury auctioned €3.18 billion of 12-month and 18-month Treasury bills this morning. While borrowing costs surged at the auction, demand stayed strong. Markets rallied after the auction and Spanish 10-year yield fell on the news.
But PIMCO’s Bill Gross told CNBC that he doesn’t trust Spanish auctions because they are just a function of Spanish banks:
“It is an artificially controlled market for the most part. That doesn’t mean private investors like PIMCO wouldn’t buy Spanish bonds but for the most part the bills offered today, and the twos and tens offered later this week basically are bought by Spanish banks, as a function of the Spanish economy, and the Spanish connectivity in terms of simple banking. So you can’t really trust an auction, not only in Spain, but in Portugal, Ireland, anywhere in Europe basically, it’s a function of what their banks are doing as opposed to what we are doing from the outside.”
Gross also compared Spain to a tumour saying it didn’t have to be cancerous, but it would inhibit the “normal function of other organs.”
Watch the entire interview at CNBC:
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