Nutty Bond Wonderland in Europe Just Reached New Heights of Madness

Not even the “bankruptcy” word hanging over super-troubled Italian infrastructure giants Atlantia and Autostrade, whose bridge collapsed last year, can get their bonds to reflect any kind of serious risk.

By Nick Corbishley, for WOLF STREET:

On Monday, Standard & Poor’s slashed Italian infrastructure giant Atlantia SpA’s credit rating by three notches, from investment-grade BBB- to BB- (“junk”) amid concerns the Italian government could revoke its all-important road concessions business in Italy in response to the collapse of the Morandi bridge in Genoa in 2018. This downgrade affects Atlantia’s roughly €36 billion of debt that is now considered “junk.”

Atlantia was already downgraded by Moody’s to Ba2, two notches into junk, earlier this month, after having been downgraded to Ba1 (one notch into junk) in early December. Moody’s also cut the rating of Atlantia’s motorway unit Autostrade per l’Italia (ASPI),which accounts for roughly a third of Atlantia’s revenues, to Ba1. Fitch last week downgraded Atlantia to “BB”, two notches into junk, and ASPI to “BB+” (one notch into junk).

Atlantia and ASPI, as well as scores of their executives and employees, face a criminal inquiry for potential negligence in the 2018 bridge collapse, which resulted in 43 fatalities and left 600 people homeless. That inquiry is yet to conclude but Prime Minister Guiseppe Conte ominously told La Repubblica this week that Autostrade is guilty of grave negligence, adding that the government had to protect the public interest rather than ensuring a future to private concessionaires.

In September, new evidence emerged that Autostrade employees had falsified safety reports on other viaducts, prompting the firm’s then-CEO, Giovanni Castelluci, to finally step down after 13 years at the helm. During that time the government has gradually tightened the screws on Atlantia, to the point where even the center-left Democratic Party (PD) may also be willing to strip Autostrade of its concession.

The government’s so-called Milleproroghe decree, which is still awaiting passage in parliament, would make it easier and cheaper to revoke a toll-road concession. Instead of having to pay out around €23 billion in compensation for revoking Autostrade’s contract, the government could offer as little as €7 billion. S&P warned this would “significantly increase the risk of a shortfall in liquidity” for both Autostrade and Atlantia.

Atlantia’s CEO recently cautioned that ASPI could even be forced into bankruptcy if its motorway license is revoked and it is not fully compensated, which could push Atlantia into trouble as well. The company already warned last week that Fitch’s downgrade of ASPI could prompt the European Investment Bank and Italian state lender Cassa Depositi e Prestiti to request early repayment of €2.1 billion of loans, of which €1.8 billion are guaranteed by Atlantia.

Both firms carry huge debt burdens: close to €36 billion in the case of Atlantia, up from €9.5 billion in 2017, and around €10 billion in the case of Autostrade.

But none of this — not even the threat of a potential bankruptcy filing by Autostrade — matters in Europe’s nutty bond wonderland, where countries’ and companies’ absurdly low or negative bond yields are continually suppressed by the ECB, and where the relentless and feverish chase for yield is bailing out all bonds.

For example, an Atlantia bond due in 2027 with a minuscule coupon of 1.875%, has rallied over the past two weeks, climbing 6% from 89 cents on the euro to Wednesday’s price of 94 cents. This gives the risky junk bond a yield to maturity of just 2.9%:

A similar 1.875% bond due in 2029 issued by Autostrade — whose expressway bridge in Genoa collapsed and over which now hangs the bankruptcy-word — has been a little more bedraggled but still trades at 89.4 cents on the euro, giving this junk bond of such an iffy future a yield to maturity of only about 3.25%:

The ECB holds undisclosed amounts of 11 bonds issued by Autostrade and another three bonds issued by Atlantia. While it is not allowed to buy junk-rated debt under its rules, it is not obligated to sell debt that used to be investment grade but has since been downgraded to junk, like Atlantia and Autostrade’s. Other large investors in Atlantia include Lazard Asset Management and HSBC Holdings and Singapore sovereign fund GIC while German insurer Allianz, French energy group EDF and Chinese fund Silk Road hold minority stakes in Autostrade.

The average euro junk bond yield today is a derisory 2.60%, according to the ICE BofAML Euro High Yield Index. Thanks to the ECB’s negative interest rate policy and rampant corporate bond purchases, the bond world in the Eurozone has become completely divorced from any notion of risk, and being compensated for taking those risks, and it doesn’t even seem to matter how deeply Atlantia or its subsidiaries get into trouble. Every dip is a buying opportunity.

Yet for all of the nonchalance of the investment community, the risks posed by Atlantia’s standoff with the government are very real. As notes, a revocation of the concessions could get seriously messy, culminating in costly litigation involving not just Atlantia but also many of its institutional investors. The EU could also get involved.

Given the stakes, it would hardly come as a great surprise if the Italian government did end up offering Atlantia a compromise deal that included a hefty fine, a large compensation bill and reduced toll fares for a number of years but no revocation. But there’s also a reasonable chance it won’t: after all, relations between Atlantia and the government have never been this poisoned. By Nick Corbishley, for WOLF STREET

No one has paid as heavy a price as the generation that came of age just before and after the collapse of the housing bubble and ensuing banking crisis. ReadYoung People Still Crushed by Housing Bust, Banking & Economic Crisis: Bank of Spain

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  64 comments for “Nutty Bond Wonderland in Europe Just Reached New Heights of Madness

  1. Reality says:

    Is anyone surprised by this? This is just one more piece of evidence that Central Banks and governments will not let anything fail anymore. It’s called the Japanification of the Western world.

    There is no collapse coming. Why would there be? The only ones left in the game are the ones in control. Why would they crash their own party?

    Get used to a sure but steady erosion of your purchasing power. We are all on the road to poverty. Some arriving a little sooner than others. But sure enough, we are all on the same road.

    Good luck with your shorts, Wolf. I have a lot of respect for you. But that bet is a sure loser.

    • chillbro says:

      I love the central bank walk. Go on, honey.

    • raxadian says:

      Thry won’t let anything fall… until it does anyway.

      You can keep a sinking ship afloat by throwing the water that gets inside away, but when a heavy storm hits it will sink no matter what you do.

    • The purpose of allowing any company to fail is to provide an opportunity for asset stripping by private equity. They take over, extract government guarantees and in this case raise prices, or toll rates. If you think private equity firms stripping value from bankrupt companies is a problem, wait a while. There must be a 2x leveraged ETF to profit from this, but sadly most of them are linked to these zombie corporations whose stock price keeps going higher, think TSLA, GE, etc.

    • nick kelly says:

      For shorts there is good news and bad news. The bad news is that Tesla has ripped through all analyst’s calls to 540 a share.

      The good news for shorts of the overall market….that is the good news.

      This rip by T to close to a 100 billion, for a company that has only once squeaked out a profit ( mainly by selling carbon credits) has caused a few outfits to finally concede this market is in a mad delusion and to reduce their exposure to equities.

    • S says:

      >>But that bet is a sure loser.<<

      Maybe or maybe not. It is sad for me to indecisive with my opinions because the madness of the markets has rendered me to be no better than a guesser of outcomes or market movements. In other words, I'm defeated until one of the many black swans finally becomes seen AND understood by the markets.

  2. 2banana says:

    Boeing Executive Suite…please pick up white courtesy phone…

    “Atlantia and ASPI, as well as scores of their executives and employees, face a criminal inquiry for potential negligence in the 2018 bridge collapse, which resulted in 43 fatalities…”

    • R2D2 says:

      The Italian government won’t let Atlantia and Autostrade go down the pan. Like the Western banks of 2009, they are too big to fail. The state will bail them out — eventually. That is why their bonds are not sky-high. Investors know the government will buckle.

  3. Javert Chip says:

    Conceptually, there are (at least) 2 models for how this whole zombie corporation situation resolves itself (my terminology):

    1) Standard model: lending and capital allocation is “appropriately” priced and assets/loans resulting from failed enterprises are recycled thru bankruptcy processes back into attempts at more productive efforts.

    Some societies have combinations of corruption or cultural barriers that prolong this very natural capital recycling process.

    2) Extended model: like Japan & selected EU nations, as zombie loans continue without end, loans accumulate into ever-increasing heaps of obsolete deadwood. For example, financially it would have been possible to keep zombie 1800-era buggy-whip manufactures alive on failed loans.

    Eventually, improper allocation of capital allows multiple social & technology cycles to bypass and sideline societies.

    • c smith says:

      “…improper allocation of capital allows multiple social & technology cycles to bypass and sideline societies.”

      U.S. companies seem to be LEADING the tech cycles, rather than getting bypassed at this point. The implied question: Because of our tech prowess, do we have the luxury of simply papering over every other weakness in our system? The stock market would seem to be indicating this. Five or six companies (our tech leaders) account for a huge portion of the gains over the past 5 years.

      • Cas127 says:

        “because of our tech prowess, ”

        Apple US telling its actual manufacturing subcontractors around the world (with factories everywhere but the US…) to make the case…metallic black, is not tech prowess – it is monumental self-delusion about one’s actual standing in the world.

        • nhz says:

          yes, it looks more like lawyer prowess to me (patents, trade disputes, outright extortion etc.).

  4. timbers says:

    “evidence emerged that Autostrade employees had falsified safety reports on other viaducts” …..That particular quality (falsifying safety reports) is an asset in today’s private corporate world. They could go work for Boeing, Wall Street, several medical and drug companies, many defense system contractors, credit rating agencies, FBI, CIA, any major American news Network like FOX, CNN, MSNBC, PBS, BBC, the White House, State Dept, Pentagon, OPCW, United Nations….just a very quick starting list.

    • Unamused says:

      When there is a lack of honor in government, the morals of the whole people are poisoned.

      – Herbert Hoover

      That’s how it starts.

      • Cas127 says:

        But the Founders knew this and constructed a limited government accordingly.

        It took the post WWII age of oligopoly mass media poop chutes to BS a majority of Americans into believing in the infallibility of government – a delusion that led to ruin within two generations.

        The internet (and felt reality) has shredded the mass media’s tissue of half-truths and studied ignorance of the most important societal facts – but the terminal damage has already been done.

    • Happy1 says:

      At least in the corporate world people are held to account and fired when this kind of behavior comes to light.

      In government, there is no such a accountability whatsoever. I live in Denver, where a VA hospital originally slated to cost three hundred million dollars eventually was finished at the cost of two billion dollars. No one involved was fired. A few people retired early to their generous government pension. This is only the tip of the iceberg of such instances. There is a zero accountability in the unelected bureaucracy.

      • Unamused says:

        You’re blaming the government and the news media for having been corrupted by greedy malicious corporations. But you don’t blame greedy malicious corporations. That’s called deflection and scapegoating, and that’s what greedy malicious corporations do to perpetuate their greed and malice.

        Why are you doing it?

        • Cas127 says:


          Broadly speaking, people can’t be compelled to buy a corporation’s shoddy products (and thereby perpetuate them).

          But compelled “purchase” through threatened, realistic force happens every single day with government – that it why gvt products/services almost always get worse, not better.

          This process is nicely helped along by media/gvt incest – that judges the private sector by its actual results, the gvt only by its sequentially inflated, habitually unmet promises.

        • robt says:

          He is ‘doing it’ because any government budget for construction should be multiplied by at least 3x and more often 5x. The first thing the government does is underestimate the project because if anywhere near the true cost were revealed the project would never be approved. The next thing that happens is all the additions and modifications, at cost-plus. All during the project politics and bureaucratic fear dominate, and the project is run by committee. And yes, there is some slush in there for the ‘corporations’, very often because of the corruption.
          As was proved in Toronto some years ago, the government can’t even organize hot dog stands; the carts ended up costing 50,000 dollars instead of 5,000 max, they were assigned to idiotic locations, they had to conform to politically correct agenda, they were told what food to serve which ended up not being hot dogs, and all the vendors went bankrupt.

      • Unamused says:

        At least in the corporate world people are held to account and fired when this kind of behavior comes to light.

        And replaced with someone at least equally venal, until they too get caught.

        There is a zero accountability in the unelected bureaucracy.

        Not anymore, thanks to corporatists.

      • Dale says:

        I’ve been reading de Tocqueville lately. His observation was that American politicians were almost uniformly incompetent and poor, and therefore relied on making sure that the population’s needs were served for their own benefit.

        What has changed is that the politicians are now also corrupt, and enrich themselves mightily from bribes (aka donations). They are still incompetent, of course.

        For any politician you want to vote for ask, are they richer now than when they entered politics? If the answer is yes, they are corrupt.

        • RagnarD says:

          And back in the day when the size of govt was 3% of gdp, this corruption was a speed bump. But when the govt is 25-50% of GDP….????

  5. Yak now says:

    Tesla loses money on each vehicle, but they plan to make it up in volume. Smoke pot like musk and that will make more sense.

    Wework leases space long term, then rents it out hourly (no comments about the oldest profession!)… and make up losses by issuing debt.

    Shale drillers lose money on every cubic foot of gas… but they make it up by issuing stock and debt.

    It’s not just the Europeans who are financing fantasy lifestyles on debt they will never repay

    • Happy1 says:

      It is an upside down world and even worse than 1999 to 2001. When it reverses it will be cataclysmic.

    • Cem says:

      You have one company doing nothing particularly special with a failed IPO under its belt to company that changed, in a very large way mind you, one of the largest industries on the planet due to their innovation.

      “make it up in volume” yes economies of scale is a thing and in fact one of the simpler concepts in economics to understand.

      In 2025 when people like you are still talking about the impending doom of Tesla, hopefully an even larger portion of the population will be rolling their eyes at you.

      • Cas127 says:

        “that changed, in a very large way mind you, one of the largest industries on the planet ”

        The talk has far, far outdistanced the reality with Tesla.

        Toyota had hybrid tech increasing MPG by 60 pct by the late 90s – nobody was Tesla delusional about them.

        Full electric may *someday* have a profound impact – but we’ve been talking about it for a decade and my guess is that it will be *at least* another decade before electric vehicles have even a 20 pct penetration.

  6. Mike says:

    Yet when it does all finally come down the majority will have no idea why it happened. Same thing occurred with the people during the Wiemar Republic hyperinflation in the 1920’s, they had no idea why it was happening even though the reasons were slapping them across the face daily.

    • timbers says:

      Relax….it’s nothing some more QE4-ever can’t fix! On to DOW 50,000 and NASDAQ 20,000! And by then only a few will be able to afford cars which means we can build pod homes the size of shipping containers on city streets that won’t be needed any longer, to house the millennials who can’t afford homes!

    • Bobber says:

      Thoughts of past hyperinflation within the now defunct Wiemar Republic is the only thing keeping today’s stock market bubble alive. People think the Fed will print money till oblivion, like in Wiemar, so they have to stay somewhat invested in hard and productive assets that provide some protection against hyperinflation. The problem for these folks is that stock prices have risen dramatically more than inflation, so past stock price surges have been due to P/E multiple expansion, not inflation. People not realizing this are going to get their head handed to them pretty soon.

      There may be time to engage in a Wiemar-influenced investment strategy, but it’s not now. Wait until there is actual inflation above 4%. Arguably, the inflation rate will never get that high because social unrest would happen first. Hold some gold in the meantime to hedge yourself.

      • nhz says:

        Actual inflation will never rise above 4% because the crooks from the Ministry of Truth will get their hands on the numbers first.

        BTW, inflation in Netherlands is above 2% for the second year (2.6% now), the Dutch housing market is batshit crazy and way more dysfunctional than at any time since WWII, government worker wage increases are in the double digits but no peep from ECB about mission accomplished…

        • LB says:

          NHZ- Globalists are clearly now in command of national economies. Just over 2% is the rate of inflation for UK & US as well as Holland and France + Italy may be higher given their problems. It cannot be coincidental, it has to be done deliberately as all ECBs follow the same pattern of money management (sic) . Negative interest rates of course is their most irrational policy.

  7. Yak now says:

    California, Illinois, NY/NJ/CT all have delusions of solvency also.

    And there are (cough) muni “bond holders” who think they will be repaid with freshly printed zimbabwe bucks too.

    A sucker born every minute…

    • Happy1 says:

      There will eventually be blood in the streets in the municipal bond market when the economy turns. Anyone’s guess when that will happen.

  8. 2banana says:

    The GM bondholders thought they were first in line too, by over a 100 years of contract law.

    A very generous payback, to a very political organization, changed all that.

  9. Tang says:

    Another good article revealing information that we commoners can’t fathom why companies can be so successful with such high share prices. What is behind these companies?
    Glad that Wolfstreet dot com is always throwing light on all these.

    Yet the modus operandi is nothing new.
    Just some decades ago in China and many parts of Asian countries there were always pedallers of snake oil.

    They were good schemers often able to concoct the so call ‘cure for all’.
    They displayed their goods and beat their gongs, drums and chest aloud.
    Follow up with great aerobatics and demonstrations that proves the greatness of their concoction. And spectators many were taken for a ride.

    And they moved on to the next city to repeat the same act to another group of audience often reference to the new audience how successful their “cure” was at their previous

    Yeah. The same “snake oil” phenomenon persists. And of course the vocabulary is very different.

    The paid business news media in desperation for business every ready to help with beating the drums and the gongs.
    And those with vested interest in the “snake oil” business, lenders suppliers etc and even government.

    And to complete the great show we now have the omnipresence social media.

    Companies like Alibaba, Telsa etc loves to drum-beat the China song. Because CHina has the largest population, biggest country so therefore you set foot there the illusion of success is a positive make-believe case.

    One has to think harder. It is a communist country with centralised leadership, thinking, policies and believes etc. Think wider it is a heterogeneous country. Her people has been there before the CCP came into power in 1949. Think about the economic factors as well. There are thousands of cities, towns and villages in such a huge country. Selling in one place is not the same as doing same business in another.

    Again non communist countries like India, Indonesia etc does have problems as well. Even Japan where the regulations and language could be mind-boggling.

    In the early years of 1998 I once joined a startup think the name is Esker from France.
    They wanted to setup a regional Asian office to promote their software business.
    Possibly they could have grants in different forms and they could be making use of the them. In 5 months the Asian office was closed. I learned later they have just IPO and reported to their shareholders that their Asian office sales went up 100%.

    All those promised glitters gold in illusion.

    • nhz says:

      For sure not specific for Asia; similar snake oil practices were rampant in Europe during the Middle Ages (and probably much earlier already …). And of course, a big part of the current economy like most of Big Pharma is just a more sophisticated version of this; only difference is they don’t have to move to another city, they just move on to another worthless but very expensive “miracle drug”.

  10. nhz says:

    It’s similar to how any POS home in Netherlands can sell for 300K euro, even if it isn’t suitable to live in: EU speculators are desperate to get rid of their cash. Read the news about how Germany is making anonymous cash gold purchases impossible, similar to how physical gold purchasing has been almost banned in Netherlands after the Financial Crisis. Authorities want to make sure there is no safe alternative to holding quickly depreciating euro currency.

    Netherlands is now too gearing up for NIRP (ZIRP having been the norm for about 2 years now): from April 1 there will be a 0.5% negative interest rate for savings above 2.5 million euros. Expectation is that this NIRP policy will quickly work its way down to savings above 100K euro. Keep in mind that this is on top of the Dutch 1.2-1.7% wealth tax (and 2.6% inflation).

    The ECB is extremely good at destroying the EU economy (and housing market). The politicians LOVE what they are doing because the middle class is quickly eliminated and only government (and those with government jobs or on social security) and multinational corporations remain safe. More power to the crooks in office …

    • Unamused says:

      Plutocracy always works, but only for the plutocrats. Everybody else gets crushed and controlled. Call it a business model.

      All political and social systems inevitably fail the people if they lack controls which ensure they are accountable to the people, who themselves must be trained to resist corruption and embrace restraint. There is no other way. Most of the world’s governments are plutocracies with only the barest pretence to democracy, and the rest can only hope to resist being fully compromised by plutocracy, by persuasion, coercion, and corruption. There are reasons why the historical model has alway been the priviliged rich and powerful dominating a disempowered and impoverished population. And there are reasons why the very existence of an enlightened middle class has only been an aberration of history, and soon to pass.

      • Happy1 says:

        The middle class worldwide is larger than it has ever been. It is certainly true that there are corrupt and self dealing governments, but probably less so than at any time in recorded history. You think feudal Europe or China were better?

        And the bane of modern democracy has more to do with the people raiding the public till than plutocrats pulling the wool over anyone’s eyes. Our government, national and also at the state level in most instances, is spending money it doesn’t have to provide benefits to people who could and should be paying for themselves. Public unions in Chicago prosper while the taxpayer is crushed. Candidates suggest universal basic income while spending and debt skyrocket. In the US at least, I’m far more concerned about the raiding of the public till and confiscation of my property for taxes than I am about how much money Bezos has.

        • Cas127 says:

          One does not preclude the other.

          There is no shortage of liars and crooks in this world. In either the private or public sector.

          But I will say this – only the gvt is given the power to *force* you to buy its bullsh*t.

        • nhz says:

          In the European Middle Ages revolutions were started when taxes topped 10%. In parts of Northern Europe the cumulative tax on small business owners is already 80-90% so yes in some ways feudal Europe was better (more fair) …

          Agree though that raiding of the public till is a big problem because just like growing wealth disparity, there are way too big differences between who profits (the elites, government workers and much of the rubble at the bottom of the pyramid who only take from government) and who pays (in EU foremost the middle class / small business, and savers).

        • Unamused says:

          The middle class worldwide is larger than it has ever been.

          No, it’s not.

          It’s not my job to discredit disinformation. What’s yours?

  11. MC01 says:

    The question is very simple: who is buying these bonds?

    Yield chasing is simply not enough to explain this madness: risks are still completely out of whack. Even if the government does what everybody expects them to do (nothing) Autostrade and Atlantia are going to be financially savaged by the lawsuits piling against them, and the latter adds to that a nice €35 billion in debts.
    Autostrade and Atlantia are now both junk-rated companies, meaning things for them are going to get tougher: more and higher quality collaterals will be needed to borrow money from now on and the ECB won’t be able to directly help them out anymore. That’s the law talking, not me.
    I understand modern finance is all about “chasing momentum” no matter how horrible the fundamentals (Beyond Meat, Netflix and Tesla I am looking your way) but what momentum does Atlantia have? The assumption the Italian government will bail them out? It will happen, but one needs to remember M5S is already a spent force.
    They won the elections promising to get tough on bankrupt banks and corrupt economic godfathers and have been doing the exact opposite: banks are bailed out on a strict no questions asked basis and the godfathers (starting from real estate speculators) get a free pass because otherwise “we’d send the wrong signal to the economy”. Right.

    M5S won about 32% of the popular vote during the general elections. During the most recent regional elections they had been reduced to a minuscule 7.4%. Betraying every single electoral promise may “send the right signal to the economy”, but it’s also a one way ticket to the “failed politician” line at the unemployment office.

    • nhz says:

      Same story with other populist parties all over Europe, if they ever get into government position (in most EU countries that is only local/regional government, as populists are mostly banned from national government using all kinds of dirty tricks).

      And maybe the M5S position makes sense: while their pre-election position on many issues may reflect voter opinion, in the end most voters only care about the money (promise of jobs, higher wages/pensions or whatever, irrespective of the economic/social cost). I see much of the same playing out in Netherlands with its neo-liberal government (and populists on the sideline): there are many serious problems that desperately need policy changegs, but the government and most of the voters only care about the money so nothing really is done except some paper shuffling, all together down the cliff and pretend we are doing great.

      The good news is: there never was a better time to be a speculator, or a deadbeat :)

      • MC01 says:

        Most of these so called “populist parties” are nothing more than smoke and mirrors, but they reflect two political realities nobody wants to confront in Europe.
        The first is that economic growth can mask a lot of things… as long as everybody gets a slice of it. Is everybody getting a slice of economic growth in this Continent? No, and to make matters worse the number of bagholders (those required to make sacrifices in name of said economic growth and paid in IOU’s) keeps on growing by the day.
        The second is that political mentality has become so stale and homogenized it’s really hard to pick one party over the other. There’s nobody (bar perhaps the FN in France, and it’s a big perhaps) with what can be called remotely fresh ideas. Said mentality is so stale that even very modest proposals such as reducing immigration or cutting some fiscal benefits are met with wailing and gnashing of teeth, like Attila has risen from his grave and is burning and pillaging his way through Europe once again.

        • nhz says:

          Will be interesting to see where Austria is going, now that their new chancellor has declared fighting both climate change AND illegal migration a high priority. I think he means what he says, question is if he can deliver on that especially given the pervasive influence of the EU on many topics.

          In much of Europe those who want to do something about climate change (primarily the “Greens” and other globalists, but for different reasons) are also in favor of rampant migration and even more benefits for deadbeats and economic “refugees”, which obviously doesn’t help for improving climate and getting a smaller environmental footprint. And those who want to do something about illegal migrants or economic refugees (primarily the “populist parties”) often deny climate change and don’t want to spend a dime on green energy, fighting pollution and other severe problems.

          Concentrating on just one part of the problem will not bring us very far and only delay the inevitable.

        • MC01 says:

          Around 2005 both the Federal and local governments of Austria made a massive effort to market themselves to foreign investors and Austrian banks pitched themselves very aggressively to both German and Italian savers and companies.
          I looked into the thing and let’s just say not everything that glittered was gold. Lots and lots of strings attached to those seemingly sweet ten-year deals to get discounted utilities and low interest rates. No thank you.

          Their politics are more or less the same thing: they are not what they seem. They are very much built upon stock catchphrases, such as the usual environmental slogans that have been around since the 80’s and basically the same program for both sides, chiefly built around milking the EU for as much money as possible.
          But since European media take their cues from the New York Times and the CNN (not a compliment) and take everything at face value, Austrian politics sound a whole lot like a nest of extremists of all colors while not much has changed over three decades.
          In the meanwhile the bagholders are growing restless and ready to follow anybody pretending to have a simple answer to difficult questions, but nobody cares about them. Until they become a critical angry mass ready to explode.

    • Unamused says:

      The question is very simple: who is buying these bonds?

      Certainly the question is simple, but it leads to other questions which are not so simple.

      Who can afford these bonds? Who can afford the risks? Who can get bank funding to buy them? And who has a vested interest in perpetuating corrupt companies? I don’t have to guess.

      I don’t see any equitable way forward except bankruptcy reorganisation and imposition of strict controls, with investors taking mighty haircuts and prison for the perpetrators. Do you?

      But I also see that inequitable ways forward will once again prevail. The apparent risks must be reinterpreted. In the past I might have placed bets on it, but these days I only want to watch from what I can only hope is a safe distance. I’ve had enough of getting suckered into supporting corrupt systems.

      • Cas127 says:

        “Who can afford these bonds”

        Once you re-conceptualize governments as master forgers with short-term infinite printing powers – a lot of self-evident idiocies resolve themselves.

        Longer term, the their economies just degenerate as savers slowly (or quickly) migrate away from the Monopoly fiat domains of these master forgers.

        • Unamused says:

          Once you re-conceptualize governments as master forgers with short-term infinite printing powers – a lot of self-evident idiocies resolve themselves.

          Central banks control currencies, not governments.

          Not even a good try.

  12. historicus says:

    How much paper of this company does the ECB own?
    When basic economics is suspended, turn to the central bankers…the great interrupters of free markets and price discovery.

  13. Old-school says:

    We are at the stage of the bubble where ignorant people make more money than someone who knows what they are doing. It want last too long.

    • Mora Aurora says:

      The latest ‘eau de toilette’ from Gwyneth Paltrow comes to mind.

      There is both quantitative easing and cultural easing. One is excessive money printing driving up ridiculous assets and the other is excessive people imprinting ridiculous asses.

    • Bobber says:

      Are they ignorant, or just greedy and manipulative?

      In any case, I agree it won’t last too long.

      It think the smart and greedy types will be nimble enough to avoid major disaster. The ignorant ones, who actually believe the Wall Street BS, will be led to the woodshed, along with their dimwitted financial advisors.

      The smart and conservative players will watch it play out.

  14. c smith says:

    Why is this surprising? If the marginal buyer (central bank) has infinite “resources” and intention to buy, prices will not fall until something changes.

  15. DanS86 says:

    Who would have thought the Junk Bond market would become a front-running casino? They are laughing all the way to the bank.

  16. John says:

    Sounds like they, the ECB aren’t allowed to buy these no more. Lazarus is toast. Thanks Wolf, what a world we live in now.

    • nhz says:

      If ECB aren’t allowed to buy them, one of their proxies will using free ECB money; or Ms. Lagarde will change the rules, if that benefits her friends – keep in mind she has profound experience with such corrupt policies. Nobody in power cares what is on the ECB balance sheet as long as it keeps expanding, because you know – inflation is still “too low” if you believe the Ministry of Truth.

      This charade will continue until the guillotines start chopping.

  17. joe says:

    Didn’t bother reading the article as it is obvious from the heading – – -buyers of the crap (retirement account managers) are not the fiduciaries of the people buying the crap, in their retirement accounts. Remember fiduciary responsibilities were eliminated in by law.
    So, trust the guy you are not allowed to trust by law.
    Same as, expect the police to protect you although the Supreme Court ruled they are not required to protect you.
    And petition for removal of the elected guilty? They raise the bar for petitions. See Virginia.

  18. Cas127 says:


    “Central banks control currencies, not governments.”

    How many armored divisions does the Fed have?

    At the end of the day, DC dictates Fed policy – if the Fed did anything DC did not want…for any length of time, the Fed’s mandate/powers would be quickly changed.

    • nhz says:

      Same story with the ECB, although the politics are controlled by majority voting from many nations instead of the US duopoly; this guarantees that the southern deadbeats are in full control of ECB policy. In both cases the central bank does the dirty footwork for politics and results are very similar, currency destruction and growing wealth disparity. But wealth disparity in Europe is growing in different ways (maybe a bit similar to the red and blue states in the US?).

  19. Milo says:

    Mussolini defined his fascist movement as the merging of state and corporate power. In such a case, the markets are correctly pricing the risk on these corporations because they are merged with government power which will not let them fail.
    For the exact same reason, I own a bond issued by Boeing. I am not worried about the fact that their commercial planes auto-pilot into the ground and kill everyone. Boeing is one of a very few military producers left (after all the anti-American mergers), and there is no way in heck the government would let Boeing default on its bonds. We’d have a whole legion of congress-critters standing up and saying that it is imperative that every taxpayer turn over their money to Boeing, or else we are all doomed.
    So, there is no risk. Like there is no risk in those Italian companies because the government power won’t let them fail. When the rules have been changed so that corporate power and government power is now merged, then investors have to deal realistically with that world. Just make sure you know when to give the salute to Il Duce.

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