We don’t need a bail out, but please buy our bonds…

The Spanish situation is now reaching the “ridiculous” phase, where we will be getting conflicting messages on a daily basis it seems. Spain is telling the world it doesn’t need a bail out, but would love to see the ECB step up the bond buying. The “positive” effects from the mighty LTRO has only accomplished one thing, an arbitrage where the Spanish banks have loaded up on Spanish sovereign debt, all financed by the ECB. Despite this fact, some want the ECB to restart buying Spanish bonds. As we wrote earlier this week, we are getting that funny feeling regarding Spain. Maybe after all it is time to bring out those pesetas? From Bloomberg.

A Spanish minister called on the European Central Bank to do more to stem the sovereign debt crisis as the cost of insuring the country’s bonds against default surged to a record.

“They should step up purchases of bonds,” Jaime Garcia- Legaz, a deputy minister in Luis de Guindos’s Economy Ministry, said yesterday in an interview.

His comments came as ECB officials split over the steps to tame the crisis amid growing expectations that Spain will be the next euro member to seek a European bailout. Spanish banks’ borrowings from the ECB surged almost 50 percent in March, data showed yesterday, as they took almost a third of the longer-term lending offered to euro-region institutions.

Meanwhile, the Euro area is as organized as ever.
While Executive Board member Benoit Coeure signaled on April 11 the bank may start buying Spanish bonds, his Dutch colleague Klaas Knot said yesterday that the ECB is “very far” from reactivating a policy that failed to stop a selloff in Spanish bonds in November.

“I hope we never have to use it again,” he said in Amsterdam.

Full article here.