Today Portugal had a successful debt auction with strong demand and at lower-than-expected yields.
But everyone kinda knows that it was a joke: the fix was in. Between ECB and the Chinese, this auction was designed to succeed with flying colours, and it doesn’t reflect any new underlying hunger for peripheral debt.
Except, that, well, we’ve seen this kind of intervention before. A lot, actually, and it doesn’t usually do anything.
It certainly doesn’t typically produce huge moves in the euro, like we’re seeing today.
And it doesn’t typically result in monster gains for banks.
Check out this 11% gain in Banco Santander:
Is it something other than short covering? Is the market finally believing that the rich European states will step in and bolster the PIIGS in a way that’s more than just providing support?
Or maybe it’s a combination of the above two combined with decent economic data, creating a perfect mini storm for the bull.
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