Out Fox The $treet

Evidently the 3 year funding program initiated by the ECB at the end of 2011 was more crucial to the bond markets than anybody originally thought. Spain issued twice as many 3 year bonds as planned at a yield significantly lower than last year. The 10 billion euros were priced at 3.38% compared to 5.18% when auctioned in December. Italy placed 12 billion euros and greatly reduced rates as well. So much for the funding concerns that Europe was suppose to face in 2012. The ECB liquidity measure has been a boon for at least bonds 3 year or less in duration. Now extending bond sells to 5 & 10 years might be an issue. For example, Italy still has a 10-year yield of 6.6%. This news makes me wonder how the Corzine trade at MF Global would've faired now considering the drop in rates. Those 1 year Italian notes would've paid handsomely at this point. Some more good auctions like this and the market will put Europe on the back burner and start focusing back on fundamentals....

Guess its good news that the European Union members continue to reach for solutions to the debt crisis. The bad news is that none of these grand ideas ever get implemented. Its only been a month since the last solution was announced but never implemented. Now it appears the solution is for the ECB to lend the International Monetary Fund money to lend to Italy. The amount being floated amounts to roughly $800M. Presumably this would be enough to stave off the markets for 12-18 months in order to give the new Mario Monti government time to implement reforms. Reducing the interest rates back down to 4-5% is crucial for a huge debt load. Imagine if Japan or the US had to start paying considerably high interest rates. Both countries would be sunk as only the absurdly low interest rates is holding us above water.  Whether this new idea works is debatable, but it is a solution of significant size to give Rome time for reform. The IMF has been successful in Iceland and Ireland alread...