Banco Espirito Santo & HY Credit

Before Europe closed Banco Espirito Santo, Portugal's Megabank which Goldman bought in to recently I believe around $.24 crashed -40% today before being halted "Pending Information", now at $.12.

You may remember about a month ago when this first started on a default how quickly (within the hour) this spread to sovereign bonds in the PIIGS European periphery (Portugal, Ireland, Italy, Greece, Spain, etc.) and then to the US index futures within another hour.

We saw something REALLY scare HY Credit right around the time of the European close...

 HYG (High Yield Corporate Credit) today, right around 11:30 something sent it down hard. I suspect it is a combination of things, one being Banco Espirito Santo in which Goldman , the Muppet master was slayed.

HYG vs ES today

We also have the weekly outflow for HY credit for this week at $1.69 billion dollars after last week's $2,4 billion and all of this right after window dressing and the quarter ended on July 1st in which numerous unrelated indicators and assets all saw similar declines on the same day.

Credit does lead, this is one of the best examples of it and I recently posted why the market cannot maintain these levels with HY Credit falling.

In addition, this morning the ISDA confirmed Argentina did trigger a CDS event July 30th when they failed to negotiate a deal with hold out hedge funds (something like the Greek bond restructuring, except this went down a bit differently).

 HY Credit on the year vs the SPX, bounce or not, it won't be long before the market follow HY Credit lower, much lower. Based on HY credits' current position, the SPX should be at 1775.

Also as forecasted a day ago, the $USDX has taken a hit as well.

Also as forecasted, partly because of the $USD divergence, gold is up 1% on the day, GDX up nearly +.70%. Treasuries are up on the day thus far.

As far as the breadth of selling, the NYSE TICK has made several trips to levels below -1500.