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    Daily Digest 12/1 – Spain, Italy Face Bonds Pressure, Russian Debt to Rise, Record for Silver Eagle Coins

    by saxplayer00o1

    Wednesday, December 1, 2010, 5:00 PM

  • Spain, Italy Now Face Bonds Pressure
  • Cost Of Insuring Italian Bank Debt Marches Higher
  • S&P threatens Portugal Downgrade
  • Trichet Says EU’s Resolve on Euro Shouldn’t Be Underestimated
  • IMF’s Lipsky: Euro `Solid,’ Threat `Wildly Exaggerated’ -Bloomberg
  • Newport: Home Prices Not Even Close to Bottom
  • Fed’s Kocherlakota Says Economy ‘Decelerated’
  • Russian Debt Set to Rise to 16% of GDP by 2012: Bond Prospectus
  • Hedge Funds Bet Against Euro, Shirk CDS, in Crisis
  • Portugal’s Banks Pile Up Sovereign Debt
  • Portuguese Central Bank Warns of ‘Intolerable Risk’ (Audio)
  • US Mint’s Silver Eagle Coins Set for Record in Nov.
  • Interesting Melt Values for Old Silver Coins Listed at Coinflation

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Economy

Spain, Italy Now Face Bonds Pressure

The borrowing rate for Spain rose to 5.57%, while Portugal’s equivalent remained high at almost 7.2%. The gap between Spanish and benchmark German borrowing rates widened to three percentage points, an all-time high….Italy too was under pressure today, with the spread between its 10-year rates and those of Germany widening to two percentage points for the first time. Italian bond yields jumped to 4.687%. In addition to approving an €85 billion deal for Ireland on Sunday, European Union ministers outlined measures under which sovereign debt could eventually be re-structured, signalling that bondholders may have to bear some of the costs of future bail-outs.

Cost Of Insuring Italian Bank Debt Marches Higher

The cost of insuring bonds issued by three of Italy’s largest banks rose Tuesday as contagion from the sovereign debt crisis spread like wildfire across Europe, ensnaring other peripheral E.U. sovereigns that until recently were considered healthier. Insurance, sold in the form of derivatives called credit default swaps, became more expensive on senior unsecured bonds issued by Banca Italease SpA, Banca Monte dei Paschi di Siena SpA (BMPS.MI) and UniCredit SpA (UCG.MI). CDS on Italease debt rose to 288 basis points from 270 basis points at the close on Monday, according to data provider Markit. CDS on Monte dei Paschi rose to 265 basis points from 249 basis points, and CDS on UniCredit rose to 194 basis points from 177 basis points Monday night, according to Markit.

S&P threatens Portugal Downgrade

Standard & Poor’s tossed a bit of fuel on the euro zone financial blaze Tuesday by threatening to downgrade Portugal. S&P put its A-minus long-term debt rating on Portugal on CreditWatch with negative implications, saying a downgrade is possible in the next three months. The move comes as the weaker European economies, known collectively as the PIIGS for Portugal, Italy, Ireland, Greece and Spain, are under attack in the bond markets.

Trichet Says EU’s Resolve on Euro Shouldn’t Be Underestimated

European Central Bank President Jean-Claude Trichet said investors are underestimating policy makers’ determination to shore up the euro region’s stability as contagion spreads through the bloc’s bond markets. “I don’t believe that financial stability in the euro zone could really be called into question,” Trichet told lawmakers in Brussels today. Observers “are tending to underestimate the determination of governments.”

IMF’s Lipsky: Euro `Solid,’ Threat `Wildly Exaggerated’ -Bloomberg

The euro has a “solid” value and “seems broadly appropriate,” the International Monetary Fund’s John Lipsky said Tuesday, adding that perceptions that the currency is under threat are “wildly exaggerated.” In an interview with Bloomberg and posted on its website, Lipsky, first deputy managing director at the IMF, also defended efforts to shore up Ireland and Greece, which give those governments “breathing space to make the adjustments they need” and “to convince market participants of the success of their efforts.”

Newport: Home Prices Not Even Close to Bottom

In light of the latest S&P/Case-Shiller report on home prices, economist Patrick Newport of IHS Global Insight expects prices to fall another 5 to 10 percent before things get better. And it’s time to go to the mall – to look for a job.

Fed’s Kocherlakota Says Economy ‘Decelerated’

U.S. economic growth has been “low and has recently decelerated still further,” Minneapolis Fed President Narayana Kocherlakota said Tuesday, according to a transcript of comments prepared for delivery to Hamline University in St. Paul, Minn….. He also repeated his idea for a consumption tax, a labor-income tax break and a one-year investment tax credit that he sees as the equivalent of a 100 basis point interest-rate cut. Kocherlakota becomes a voting member of the rate-setting Federal Open Market Committee in 2011.

Russian Debt Set to Rise to 16% of GDP by 2012: Bond Prospectus

Russia’s sovereign debt will rise to about 16 percent of gross domestic product in 2012, according to a preliminary prospectus for the government’s first sale of ruble Eurobonds obtained by Bloomberg. That compares with 8.3 percent in 2009, 11 percent at the end of this year and 13.6 percent in 2011, the document shows. Domestic debt will account for a larger share of state liabilities over the next two years as the government steps up ruble borrowing, according to the marketing materials, which were prepared by the organizers of the ruble Eurobond offering.

Hedge Funds Bet Against Euro, Shirk CDS, in Crisis

Hedge funds are betting the euro will fall further as Europe’s sovereign debt woes spread but have largely abandoned bond insurance trades given uncertainty over political interventions following Ireland’s bailout. Some are shorting the euro or taking long positions in the Australian dollar or Norwegian krone versus the euro, betting interest rates in those countries will rise while euro zone rates will stay low.

Portugal’s Banks Pile Up Sovereign Debt

Portuguese banks are buying their government’s debt at a fast pace, a move that could pose a risk to institutions that so far have weathered the financial crisis better than many. According to the Portuguese Central Bank, the country’s financial institutions, including banks, have together invested €17.91 billion ($23.5 billion) in the country’s public debt as of September, up 87% from €9.58 billion a year ago. Since the beginning of the year, the exposure has risen 77%. The move also highlights contradictions European authorities are facing to save the region’s economies. The officials are providing cheap funding to banks through the European Central Bank, and economists say the banks seem to be using that money to buy government bonds, thereby leaving the country’s banking system vulnerable to risks associated with sovereign debt.

Portuguese Central Bank Warns of ‘Intolerable Risk’ (Audio)

The Bank of Portugal claims its own banking industry faces what it calls an “intolerable risk” if the country fails to get a grip on its spending and borrowing. The warning is contained in the Bank’s Financial Stability report which is published this morning. The Portugese budget deficit has continued to worsen despite government spending cuts.

US Mint’s Silver Eagle Coins Set for Record in Nov.

The U.S. Mint’s American Eagle silver coins sales are set to rise to a record above 4 million ounces in November, as a European sovereign debt crisis and economic uncertainty prompted individual investors to bet on silver and gold as safe havens. Total sales of the popular one-ounce silver American Eagles rose to 4.2 million coins in November, the highest monthly sales since their introduction in 1986. In October 3.2 million one-ounce Eagles were sold, the Mint’s web site showed on Tuesday. The figure does not include sales from Nov. 30 but is already well above the monthly average of about 3 million coins this year. Year-to-date sales of the 99.9-percent pure silver Eagles totaled 33 million coins, an all-time high, surpassing the 29 million in the entire year of 2009.

Interesting Melt Values for Old Silver Coins Listed at Coinflation

With silver at over $28 per ounce the 1964 silver dimes have a melt value of just over $2. The  1964 silver quarters are a little over $5. Silver half dollars have a melt value just over $10, while the 1935 Peace Dollars break the trend and have a melt value of nearly $22

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