Ireland Update and El-Erian writes,"...bailout is not working."

Mohamed El-Erian wrote today, "The failure to reduce risk spreads means that the public sector bailout is not working. Rather tahn provide assurances of better times ahead and, thus, encourage new investments, ECB/EU/IMF support funding is being used by existing investors to exit their exposures to the most vulnerable peripheral European countries. This situation cannot be sustained forever. It undermines any chance that the most vulnerable countries (e.g., Greece) have of limiting the collapse in their GDP and maintaining social cohesion; it contaminates the balance sheet of the ECB; it exposes the revolving nature of IMF resources to considerable risk; and it raises the risk of renewed contagion."

Irish government debt CDS climbed to 444.5 bps from 420.5 bps on Friday.

Portugal government debt CDS climbed to 374.3 bps from 365.3 bps on Friday.

Ireland will auction off 1.5B euros tomorrow. This auction will almost without a doubt go well, especially as it is so small.