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Surge In ECB Emergency Overnight Borrowing Spooks Euro

Tyler Durden's picture




 

After hitting an overnight high of 1.36, the Euro has steadily declined overnight. The reason: a dramatic and unexpected spike in borrowings under the ECB's Marginal (and Punitive) Lending Facility. Over €15.8 billion was borrowed under the facility, the highest since June 2009, and a surge from yesterday's €1.2 billion. With a rate of 1.75%, there is nothing cool or fun about borrowing from the MLF, which is seen just as stigmatizing as borrowing from the Discount Window back when US banks didn't have trillions in excess reserves, and discount window borrowings actually mattered. The WSJ provides some perspectives for the surge: "The ECB declined to give any explanation for the high figure, which
generally reflects acute, if mostly short-lived, liquidity problems at
one or more banks. Use of the facility had been minimal at the start of the year, but
had risen to around a daily average of over €700 million in the past
week. The rise in the use of marginal lending by the ECB is all the more
surprising as there were no generalized signs of stress in the money
market Wednesday. The benchmark overnight rate for euros, Eonia, eased
to 0.7% from 0.749% on Tuesday, its lowest fixing in more than a week." According to some traders the spike has to do with a technical error, or the failure of a bank to request enough cash during normal liquidity providing operation, but a €15 billion oversight is just too big. Perhaps one should look at the fresh all time record Portuguese 10 year bond yield for clues why this has happened. Should the MLF lending spike tomorrow as well, someone will have to answer questions.

 

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Thu, 02/17/2011 - 08:33 | 969568 JNM
JNM's picture

Don't worry, it is just because of the snow.

Thu, 02/17/2011 - 11:55 | 970200 Matxeu
Matxeu's picture

i believe a 'dusting' is more accurate.  blizzards in march and may anyone?

Thu, 02/17/2011 - 08:34 | 969569 Dick Darlington
Dick Darlington's picture

Interesting story in Irish Times abt Irish banks issuing unsecured bonds to themselves (yes, u read it right) and using those as a collateral to borrow from ECB. The excuse for those bonds to be eligible collateral is government guarantee. In some other universe a guarantee from an already bailed out bankrupt govt wouldn't be worth much but in Europe that's not an issue. After all there's a lot of tax payers in OTHER countries who can be thrown into the flames.

Thu, 02/17/2011 - 08:38 | 969571 HUGE_Gamma
HUGE_Gamma's picture

tungsten bitchz

Thu, 02/17/2011 - 08:41 | 969573 shortus cynicus
shortus cynicus's picture

is thungsten already an investment grade commodity ?

Thu, 02/17/2011 - 08:42 | 969574 4realmoney
4realmoney's picture

It spooks the Euro and is sending gold higher.


Gold Price

Thu, 02/17/2011 - 08:45 | 969579 becky quick and...
becky quick and her beautiful mouth's picture

borrowing from MILFs, eh?

Thu, 02/17/2011 - 08:56 | 969600 BearishFeijoadaSushi
BearishFeijoadaSushi's picture

lol

Thu, 02/17/2011 - 08:47 | 969581 primefool
primefool's picture

Wow look the Euro plunged from 13592 to 13572 a whole 20 ticks!!

What happens in Euroland is irrelevant, what happens in the middle east is irrelevant, wht happens in the US economy is irrelevant, the Fed's forecast of what will happen to the US economy is irrelevant ( although a case can be made for fading it).

The ONLY thing that matters is whether the Fed will keep feeding the Monster.

Thu, 02/17/2011 - 08:52 | 969590 snowball777
snowball777's picture

It's less about who is being fed by the Fed now...than the millions who aren't.

Thu, 02/17/2011 - 08:50 | 969587 snowball777
snowball777's picture

But it's not even May yet.

Thu, 02/17/2011 - 08:53 | 969593 Corduroy
Corduroy's picture

If anyone outside of the banking industry presented this graph to their boss they would be fired or at least get an as kicking.

I bet an Irish bank is currently screaming SNAFU

Thu, 02/17/2011 - 08:54 | 969594 sudzee
sudzee's picture

Not to worry. IMF will bail the world out with SDR's. EURO does't work with just 20 or so countries involved why would anyone expect the SDR's to have any credibility in trying to work for 200 countries. If the so-called  "SDR currency " is not available to the masses why would the world have CONfidence in it. How friiiiicken many "currencies " does the world have to deal with. SDR's for countries, digital money for the eletes and chmp change for the masses. All politicians should be executed right now.

By the way : where is Obummers big speach about freedom for the people of the middle east. No, not until thousands have been murdered by US backed regimes and he can then ride in on his three legged horse and make political currency out out of the sacrifice of the oppressed.

 

Thu, 02/17/2011 - 09:02 | 969601 ivana
ivana's picture

SDRs would make it if any of BRICS would accept it. But it does not seem so. Highly unbelieveable that any achemist can make a pie out of different crappy ingredients

Thu, 02/17/2011 - 09:03 | 969612 Corduroy
Corduroy's picture

If the SDR goes reserve currency they will change its meaning from "Special Drawing Rights" to "Special Digital Reserve"

Thu, 02/17/2011 - 08:55 | 969597 Oh regional Indian
Oh regional Indian's picture

Sure it was a technical error. A technical in-solvency error.

Last year's Euro death discussions come to mind.

Yet another scam. Floating currencies. Fiat vs. fiat. 

ORI

http://aadivaahan.wordpress.com/2011/02/16/truth-about-america-truth-about-us/

Thu, 02/17/2011 - 08:59 | 969605 ivana
ivana's picture

Here comes major cabal utility puppet.
After denying any possibility of bondholders haircuts in ireland and asking for more and depper austerity measures, he "sees" more "global inflation " sparked by increased food demand (LOLs and tears).
Of course, no raising rates in sight for combating "inflation"

http://www.france24.com/en/20110216-rising-food-demand-could-drive-infla...

Thu, 02/17/2011 - 09:32 | 969661 taraxias
taraxias's picture

Sure, it's the peasants fault for getting hungry !!!!

 

How long do we have to wait until these criminals are hanging from a tree?

Thu, 02/17/2011 - 09:04 | 969617 Ferg .
Ferg .'s picture

Trading EUR/USD has been extremely frustrating over the past few weeks . The euro has been perplexingly resilient and its constant sync/desync with ES has been a nightmare .

Thu, 02/17/2011 - 10:04 | 969788 Orly
Orly's picture

That's not surprising when they can throw, literally, two trillion dollars at it over the past six weeks.  It is only designed to make anyone who makes a prediction in 4X look like a fool, myself especially.  /:

I am not worried about that so much, as I am a very, very patient girl and it looks like the worm is turning.  We'll see.

The critical level is EURUSD 1.35253.  Once that level is breached to the downside, the vacuum could be enormous.  More than likely, though, the Euro will hit that level and "miraculously" catch a bid, as the Pound and Euro have been doing for a while now.  Not just any bid, mind you, but a parabolic ramp-job, just to make sure.

Hang in there, Ferg., Friday's coming!

Thu, 02/17/2011 - 11:00 | 970016 Ferg .
Ferg .'s picture

I hate it when prominent analysts in Bloomberg and the WSJ et al publicly point out critical levels . Like the H&S formation on EUR/USD . The bastards are ruining it for everyone ; don't they know that there are predators out there who prey on this kind of stuff !?

I'd consider myself fairly patient as well but I'm getting a bit antsy here . Data from the US has been fairly decent ( or at least there hasn't been a disasterous release ) and cracks are starting to appear in the EMU once again . Despite this the decline from 1.3850 has been slow and unconvincing . What I will say is that Thursday has been the inflection point for this pair over the past  few weeks so I'm hoping for a continuation of that trend today .

To be honest I thought yesterday was finally going to be the decisive move to the downside . Had a clean break and close below 1.3500 after the PPI/ housing data and then , out of nowhere , without a catalyst and even as stocks were falling , EUR/USD started spiking . Head wrecking stuff . Bulls are really trying to keep the 1.3400-1.3500 zone intact . I'm tiring of the irrational bids in this pair . Sure the dollar is being continually debased , but at least its very existence is not in question ( yet ) .

Are you still in EUR/JPY Orly ? It's up against that descending trendline at the moment . Stopped me out by the spread last night . No worse feeling than that !

Thu, 02/17/2011 - 11:17 | 970077 Orly
Orly's picture

Yes.  I have been short since 113.033 and took some drawdowns.  Now, it has come back to about even.  Before that, I was short and kept getting slapped around.  You're right, that was not fun at all.

"don't they know that there are predators out there who prey on this kind of stuff"

Remember that these giant houses and the central banks- not in any coordinated or conspiratorial way, of course (wink, wink...)- have access to the same data you have and, if you're like me, running the same type of algorithms that you are.

They don't need pundits telling them anything.  First of all, they are the ones painting the candles and, second, they can see exactly the same sell signals that you do.  Sell signal = buy like mad.

The Pound Sterling has been doing this for months.  I won't trade it, so I just sit back in amazement and watch.

Thu, 02/17/2011 - 12:30 | 970347 Ferg .
Ferg .'s picture

Nothing worse than choppy sideways markets is there ?

Oh it's not that I think they're getting trade setups from mainstream pundits . Rather I think they're preying on the smaller investors who read the forecasts and position themsleves accordingly . I remember watching an interesting presentation by Jamie Saettele over at DailyFX . Basically the whole premise was that one of the characteristics of important market turns is mainstream media articles highlighting how strong/weak a certain asset is . Interesting concept and one that I fully agree with . I remember just as the Euro was turning back in June a herd of analysts were predicting 1.1000 and parity by year end . Then just before things collapsed after the QE2 announcement , forecasts for 1.5500 were being bandied about the place . 

I just think the big players love seeing that stuff in print and on screen . Draws everyone in and then boom , things just go to hell . It's a diabolical tactic because the moves it dictates are often contrary to logic and fundamentals and therefore pervert the whole concept of "efficient markets." I mean just look at US equities . It's nothing but a vapor volume bubble inhabited by Fed funded PD's and momo traders pumping up everything regardless of negative/positive data .

Given up on the Pound myself . Don't know what's keeping it buoyant .

 

Thu, 02/17/2011 - 10:23 | 969860 vote_libertaria...
vote_libertarian_party's picture

hmmmmm....Treasuries are higher today even though PPI and CPI were higher than expected the last 2 days.

 

European bank crisis rumbling closer causing 'flight to safety' of US Treasuries???

 

(which always cracks me up the Treasuries are considered safe harbors)

Thu, 02/17/2011 - 10:44 | 969942 Dick Darlington
Dick Darlington's picture

New safe harbor is Russell 2000.

Thu, 02/17/2011 - 12:57 | 970502 TideFighter
TideFighter's picture

26 homes in my subdivision. Emergency meeting called as HOA "has bills to pay", and no money. 19 homeowners are not paying:

18 of 26 are in technical default (>90 days delinquent)

16 of 26 have foreclosure filed against them

11 of 26 foreclosures are > 1 year old since filing

Zero, nada, not one homeowner has completed the foreclosure process (sale of home).

1mm dollar homes and we are laying off the gate guard and cancelling repairs (maybe the streelights go off!). I know many of these people personally (they are world travelers-have money to burn). I would charcterize their sentiment as "FU world." Keeping one offshore credit card, letting all others go. If this is happening in my neighborhood, it is contagion everywhere else too. They no longer care if their other neighbors know that they have defaulted. "You're stupid not to!" Default is now fashionable. "Can't fight the Fed or fraud!" 

Bernanke did not foresee debtor default sentiment looming larger with each QE pump. He thinks we Americans are stupid (right, 4 doctors on my street). This will not end purty, will it?

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