The question that’s constantly on the minds of currency traders: When will Spain request bailout?
Although there is no definitive answer, here are some interesting observations that I like to point out. Rajoy said today (10.31) that:
Which in essence, if you read between the lines, is calling for the EU to step in, or more specifically, the ECB to use its OMT program. This point was further confirmed when Rajoy added that “EU needs to help Spain to meet budget goals…”, which undeniably is asking the EU (or ECB) to step up its bond buying program as for Spain to reach it’s budget goals, they need lower bond yields, or lower down their cost of borrowing, and the only entity with a credible plan to help is ECB.
However, Rajoy has not mentioned any timeline for the bailout request. It seems that by not denying the possibility of a full-scale bailout, Spain benefiting from the ever hopeful investors that a bailout request will happen soon. As a matter of fact, just a couple days ago, Rajoy commented, along with Italy’s Monti, after showing their supports for Greece, that:
This constant back and forth attitude, giving the market something to hope for, should be clear to smart investors, especially considering that it has been going on for the past few months… but with rumormills hard at work, constantly providing clues and explanations to why hasn’t Spain requested bailout yet, it’s understandable why the market is still confused.
Here’s my answer to “When will Spain request bailout?”, and I think it’s evident that after today’s announcement by Spain’s spokesperson that the banking aid program will commence in early December with the disbursement of the first tranche of funds, there is no way that Rajoy will tip his hand before that, especially considering how Rajoy has been acting lately, he would definitely want to take advantage of market optimism and delay some more.
And of course, December is usually not a good month to announce major policy changes, if Rajoy is going to drag the request to December, he might as well drag it to the end of Q1 in 2013. All in all I don’t believe there will be a bailout request from Spain this year, I predict that the official bailout request will be by March 2013, if the situation in Spain does not improve.
When Will Spain Request Bailout?
October 31, 2012 by Leave a Comment