Meanwhile Portuguese 10-year bonds are close to yielding 4 per cent again.

Holey spirit

Joseph Cotterill Author alerts | Jul 10 10:22 | 1 | Share

And so to check in on Banco Espirito Santo, after we reported on their convoluted corporate exposure on Wednesday… oh dear.

That’s a chart via Reuters of the share price at pixel time. Click to enlarge.

Shares in Espirito Santo Financial Group were also suspended on Thursday. ESFG owns a quarter of BES, is down 75 per cent, and also has subordinated bonds trading at 10 cents in the euro, from 100 back in June. And it isn’t even the uppermost holding company here. As we wrote, that’s Espirito Santo International, which has missed payments on commercial paper.

Anyway, our point in the note was that BES showed periphery sell-offs (or rallies) aren’t what they were: ie totally generalised. There hasn’t been much systemic reaction to BES so far: CDS on European banks’ senior debt is 70bps, half what it was a year or so ago and back to where it was in early 2010. On the other hand both gold and Bunds rallied today. Meanwhile Portuguese 10-year bonds are close to yielding 4 per cent again. Someone’s been rudely awakened to the existence of the sovereign-bank loop.

And maybe the problem is also that the foreign investors who now own peripheral assets (having hoped for a further rally) are a lot less resilient than those who jumped in early…