What to make of the news that Banco Santander is buying back billions of its own debt at 82% of par?
Felix Salmon rounds up some of the worrying views:
…the notorious Variant Perception report on Spain and its banks, quoting Edward Hugh at some length, makes for very sobering reading. Read at in the light of the report, Santander’s buy-back begins to look more like an act of desperation than one of strength — and one which bondholders would do well to tender into.
It’s undeniable that the implosion of Spain’s formerly-hot construction sector is going to blow holes in a lot of balance sheets; the only question is where and when. The gist of the Variant Perception report is simple: the problems of Spain’s construction industry and homeowners have become the problem’s of Spain’s lenders, and the problems of Spain’s lenders are going to a major problem for all of Europe, going forwards. Meanwhile, Spain will become Ireland-but-worse, as real interest rates soar thanks to deflation and extreme levels unemployment, combined with low wages, depress the entire economy for the foreseeable future.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.