7th January 2012: ESSENTIAL Information For Investors In 2012 – All You Need To Know About Sovereign Debt Auctions In Two Simple Charts

 

Quote of the Day:

A national debt, if it is not excessive, will be to us a national blessing.

Alexander Hamilton

 

Macro Overview

TIPSTER’s Completed Sovereign Bond Auction Calendar

• Look, dear reader, I’ve done all the hard work for you… just watch my blog site and set your mental alerts. We are heading into a really important period for sovereign’s and their debt auctions will be on many investors’ watch lists and item #1 in their minds. So watch this space.
• In my last Market Nightshift article I showed you how I ranked the significance of each country with respect to the importance of their auctions to the global economic outlook. This is highly subjective (and proprietary) work from me and there are obviously huge assumptions and caveats. For example I’m not even taking into account the size of the auctions or indeed the term of the note being issued. All I have done to filter the auctions down is choose the countries I think most important to the health of the global economy and then subsequently weed out any Bill auctions (paper under 1 year) on the (very) loose assumption that it will be very easy to raise short term capital and investors probably favour rolling down the curve for a given yield. Then I’ve calibrated the variables to come up with an index ranking of each country.
• Ranking the “importance” of a country with respect to its auction is not a simple task though. For example, we should obviously look at the debt/deficit projections and debt to GDP levels, relate this to economic growth and come up with a ranking based on this. But the main issue is that Eurozone members with fiscal autonomy are not masters of their own monetary destiny, so Eurozone members must be “penalized” in this respect. Also, there is the contagion aspect; only countries too big to fail will be truly hazardous to the global economy. The larger the countries output (it is assumed) the more “infectious” it is to global conditions. So what I found in my rankings was that Italy and Spain were by far the countries of greatest concern. They tick all the boxes: high debt (in Italy’s case), high deficit projection (in Spain’s case), anemic growth, Eurozone members both of whom are big enough to bring down the entire Eurozone (and therefore the Global Economy). Watch out also for France, Belgium and the UK though!

The Two Most Important Charts Of The Month

• Anyway, I’ve used data from providers such as Bloomberg on the dates of the various auctions coming up and also made some assumptions on when auctions would take place when the data was not available. Here are the two charts you need to follow – I’ll update these weekly and broadcast them, I’ve done all the hard work, you just need follow this blog.
• Chart 1 – a 6-month view of the relevant auction (weeks) and scaled by my factors mentioned above and in the article I referred to.

Significant Auction Calendar – Weekly (click to enlarge)

• Chart 2 – a 3-week view of the relevant auction (days) and scaled by the factors mentioned above and in the article I referred to.

Significant Auction Calendar – Daily (click to enlarge)

• I’m not recommending to buy or sell anything, I’m just saying that these auctions should be of primary importance to people. Notice that this week is a HUGE week for auctions with both Spain and Italy with big auctions coming up. Notice also that for the next 3 weeks it appears Thursdays will be big days for sovereign debt watchers.

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