There was a reprieve as the coordinated effort to lend money to Europe at a discounted rate was announced, but so far it has had limited impact. Italian bond yields are once again approaching the 7% level and the 3-Month Euro Basis Swaps have been rising.

As we have said before, anything less than -100 is a warning and below -150 is a crisis. Currently the level is right in between at -127.

Yields for Ireland, Portugal, Italy, Greece and Hungary are all well into the area that they will have a difficult, if not impossible time paying off. Even if they are able to sell in the open market, the debt-load will crush their economy under the current austerity measures.

The latest slight of hand that European financial chiefs have concocted will only fool the markets for so long. As money is lent to the IMF in order to push into the banks and sovereigns, the grand circular calculation will eventually collapse upon itself. Even if the banks are provided funding (as shown in the ECB Overnight Facility chart) there is no guarantee that they will buy the debt of the EuroZone countries.

And, why should they? Now that Europe has successfully blown out CDS as a backstop used by bond buyers, there is little safety that can be assumed. The lack of foresight when it was declared that the default of Greek debt (haircuts) was a non-default will curb the appetite for new purchases of the debt for the worst off countries. What a BAD idea that was!