Anyone with a clue is dumping Spanish bonds, and the investment community in Germany, France, and Italy is doing just that, as Spanish banks foolishly lever up on risk.
Via Google Translate, please consider Bank of Spain confirmed that foreign capital flees Spanish bonds
The weight of foreign capital in the total of Spanish government debt has declined considerably in the first three months of the year, rising from 50.48% at end-2011 to 37.54% last March. At the same time, the Spanish bank increases its exposure to domestic bonds to record highs of more than 170 billion euros.
62 Billion Euro Leakage in Last 3 Months
In the last three months the international portfolio in bonds and letters of the State has suffered a leak of nearly 62 billion euros from 281.439 billion euros down to 219.601 billion euros at March 31.
Spanish banks increased their exposure to a record of 170.611 million euros, 29.16% of the total compared to 16.93% representing the end of December.
Specifically, the weight of the debt portfolio of the state of Spanish banks has six consecutive months of gains, especially since last November with the purchase of more than 100,000 million.
This has been fueled largely soothing the open bar of liquidity held by the European Central Bank (ECB), which granted a billion euros of credit to a 1% interest that has helped Spanish banks invest in bonds.
LTRO “Helped” Spanish Banks?
Notice that absurd reference to “help” in the last paragraph above. There was “help” alright, help by ECB president Mario Draghi to allow German, French, and Italian banks to dump Spanish debt hand over fist to fools in Spain.
If one thought bureaucrats could think, one might think this was Super Mario’s plan from the beginning.
Certified Crackpot Plan
Who should pay for the idiocy of loading up on Spanish debt once it implodes? The answer of course is the banks and the bondholders. But No!
Harvard Economics professor Martin Feldstein has hatched a certified crackpot plan to force risk onto taxpayers. For details, please see Ludicrous Proposal by Harvard Economics Professor to Force Taxpayers to Buy Spanish Bonds; Mish’s Five-Point Alternative Proposal