Silence of the PIIGS

Story Highlights:

• On Tuesday, Spain sold €3.4 billion of 3- and 6-month bills at lower cost compared to last month and amid strong demand.
• Successful Spanish (or other PIIGS) debt sales aren't new or unique.
• Just a month ago, any PIIGS debt sale would be front- page news—painstakingly examined by investors.
• But as the dust settles in Europe, no news is good news when it comes to PIIGS debt auctions.

____________________________________________________________________________

Good news doesn't sell newspapers. This week, true to form, the global financial media largely ignored encouraging news from Europe. On Tuesday, Spain sold €3.4 billion of 3- and 6-month bills at lower cost compared to last month and amid strong demand. It was the last planned Spanish auction for July—all of which went off without any glitches, raising just under €22 billion in total.

Successful Spanish (or other PIIGS) debt sales aren't new or unique. Since the massive rescue package was announced in May 2010, the PIIGS have repeatedly gone to market successfully, with less and less fanfare. But of the struggling PIIGS countries, Spain was the last with significant remaining 2010 funding needs. That means, aside from Greece, the confidence instilled by the rescue package enabled the other PIIGS to satisfy this year's funding needs entirely on private markets and at reasonable rates—really quite remarkable. (It should be noted Italy has more funding ahead, but has also been less a part of the crisis and is fiscally healthier overall than the other PIIGS.)

Just a month ago, any PIIGS debt sale would be front-page news—painstakingly examined by investors (and pundits) and assigned searing headlines speculating on sovereign defaults and the collapse of the eurozone. This often happens with a correction story—investors and the financial media fixate on it when all looks bad, then forget about it as things improve.

We're not declaring an end to the PIIGS troubles—they still face a tough road, trying to outgrow austerity measures and major structural readjustment. Broadly, this will include raising taxes (like Portugal's "crisis tax") or cutting spending—neither popular or easy. But the fact the Spanish auction was widely overlooked by the financial media shows, outside individual PIIGS problems, the eurozone crisis at large is less dire (and thus less interesting) than many could have believed, even as recently as a few weeks ago. It appears our friends in euroland will have more time to gradually iron out their monetary union's shortcomings.

In fact, in light of recent stronger-than-expected European economic news, favorably completed euro bank stress tests, and speculation the US recovery is slowing—folks have flip-flopped. Now it's the US that's supposedly the relative recovery risk! At least that's the scare story du jour. Investors will invariably find something to fret about—they always do. But as the dust settles in Europe, no news is good news when it comes to PIIGS debt auctions. Come to think of it, that's a pretty good rule of thumb in general.