Borrowing Costs

Tyler Durden's picture

How Safe Are Central Banks? UBS Worries The Eurozone Is Different





With Fed officials a laughing stock (both inside and outside the realm of FOMC minutes), Bank of Japan officials ever-watching eyes, and ECB officials in both self-congratulatory (Draghi) and worryingly concerned on downgrades (Nowotny), the world's central bankers appear, if nothing else, convinced that all can be solved with the printing of some paper (and perhaps a measure of harsh words for those naughty spendaholic politicians). The dramatic rise in central bank balance sheets and just-as-dramatic fall in asset quality constraints for collateral are just two of the items that UBS's economist Larry Hatheway considers as he asks (and answers) the critical question of just how safe are central banks. As he sees bloated balance sheets relative to capital and the impact when 'stuff happens', he discusses why the Eurozone is different (no central fiscal authority backstopping it) and notes it is less the fear of large losses interfering with liquidity provision directly but the more massive (and explicit) intrusion of politics into the 'independent' heart of central banking that creates the most angst. While he worries for the end of central bank independence (most specifically in Europe), we remind ourselves of the light veil that exists currently between the two and that the tooth fairy and santa don't have citizen-suppressing printing presses.

 
Tyler Durden's picture

The Real Dark Horse - S&P's Mass Downgrade FAQ May Have Just Hobbled The European Sovereign Debt Market





All your questions about the historic European downgrade should be answered after reading the following FAQ. Or so S&P believes. Ironically, it does an admirable job, because the following presentation successfully manages to negate years of endless lies and propaganda by Europe's incompetent and corrupt klepocrarts, and lays out the true terrifying perspective currently splayed out before the eurozone better than most analyses we have seen to date. Namely that the failed experiment is coming to an end. And since the Eurozone's idiotic foundation was laid out by the same breed of central planning academic wizards who thought that Keynesianism was a great idea (and continue to determine the fate of the world out of their small corner office in the Marriner Eccles building), the imminent downfall of Europe will only precipitate the final unraveling of the shaman "economic" religion that has taken the world to the brink of utter financial collapse and, gradually, world war.

 
Tyler Durden's picture

Key Overnight Events And What To Expect





Just like during the holiday "break" the market is euphoric, however, briefly, on the fact that Italy sold Bills , however many, in a period protected by the 3 year LTRO. And just like the last time this happened, about two weeks ago, this auction shows nothing about the demand for Italian paper longer than 3 years, which unfortunately Italy not only has a lot of, but is rolling even more of it. And none of this changes what World Bank President Zoellick told Welt yesterday, namely that the Europe’s interbank market is frozen and continent’s banks only lend to each other through ECB due to a lack of confidence within the financial industry, World Bank President Robert Zoellick is quoted as saying by German daily Die Welt. He continues: "If European banks don’t lend to each other, how can others in the U.S. or in China be expected to do it." Anyway, here courtesy of Bloomberg's Daybook are the key overnight events as we prepare for the ECB 7:45 announcement and subsequent conference.

 
Tyler Durden's picture

Euro Meanders In Overnight Session As Record ECB Deposit Soak Up Entire LTRO





There was not much to note in the overnight session, where aside from artificial market-boosting developments out of China (noted here) which have carried over into a risk-on mood for the US market, however briefly, Europe has been virtually unchanged following two quiet auctions by Austria and the Netherlands. Austria sold a total of €660m of 4% 2016 bonds, and €600m of 3.65% 2022 bond. Avg. yield 2016 bond 2.213% vs 1.96% in the previous auction, in other words the shorter borrowing costs roses, and the longer ones fell. Holland sold a total of €3.105b of 0.75% 2015 bonds; the target was up to €3.5b. with an average yield 0.853%. End result EURUSD is virtually unchanged for the day at 1.2770 as of this writing despite some serious short covering earlier (as expected), while the Italian BTPs remain unch at 7.15%. What is probably more disturbing and is to be expected, is that now virtually all the free cash from the December 21 LTRO (all €210 billion of it) and then some has been allocated to the ECB, where the Deposit Facility usage rose by nearly €20 billion overnight to a new record of €482 billion, €217 billion more than the December 21 notional. The question that should be asked is just what do banks know that lemming long-only investors don't. Hint - ask UniCredit.

 
Tyler Durden's picture

China Is Proud To Announce It Is Reflating The Bubble - Will "Actively Push" Investors Into Stocks





We did a double take when we read the following lead sentence from a just released Bloomberg report on what is about to take place in China: "China’s stocks regulator will “actively” push pension and housing funds to begin investing in capital markets, and encourage long-term investors such as insurers and corporate pension plans to buy more shares." To paraphrase Lewis Black - we will repeat this, because it bears repeating - "China’s stocks regulator will “actively” push pension and housing funds to begin investing in capital markets, and encourage long-term investors such as insurers and corporate pension plans to buy more shares." And that is the last ditch effort one does when one has no choice but to push "long-term investors" into the last giant ponzi. Of course, this being China, "long-term investors" means anyone at all, and "pushing" ultimately involves either 9MM or a 0.44 caliber. And what was said earlier about mocking mainstream media spin - well, the first opportunity presents itself a few short hours later - when Bloomberg, the same agency that wrote the above report, tells us that "Asian Shares Rise Amid Global Economic Optimism." Odd - no mention of the fact that China is now pushing habitual gamblers, which over there is another name for "investors" into what is openly an invitation (at gunpoint nonetheless) into the latest and greatest bubble. That said, we give this latest artificial attempt to boost stocks a half life of several days max before the SHCOMP plunges to new lows for the year.

 
Phoenix Capital Research's picture

Graham Summers’ Weekly Market Forecast (Nothing’s Changed Edition)





Against this highly deflationary backdrop, the one primary prop for the markets is hope of more juice/credit from the world Central Banks. However, even that prop is losing its strength: the gains of the last coordinated Central Bank intervention lasted just a few weeks.

 
Tyler Durden's picture

Guest Post: 2012 - The Year Of Living Dangerously





We have now entered the fifth year of this Fourth Turning Crisis. George Washington and his troops were barely holding on at Valley Forge during the fifth year of the American Revolution Fourth Turning. By year five of the Civil War Fourth Turning 700,000 Americans were dead, the South left in ruins, a President assassinated and a military victory attained that felt like defeat. By the fifth year of the Great Depression/World War II Fourth Turning, FDR’s New Deal was in place and Adolf Hitler had been democratically elected and was formulating big plans for his Third Reich. The insight from prior Fourth Turnings that applies to 2012 is that things will not improve. They call it a Crisis because the risk of calamity is constant. There is zero percent chance that 2012 will result in a recovery and return to normalcy. Not one of the issues that caused our economic collapse has been solved. The “solutions” implemented since 2008 have exacerbated the problems of debt, civic decay and global disorder. The choices we make as a nation in 2012 will determine the future course of this Fourth Turning. If we fail in our duty, this Fourth Turning could go catastrophically wrong. I pray we choose wisely. Have a great 2012.

 
Phoenix Capital Research's picture

2012 Will Mark the End of the Euro






European nations need to roll over hundreds of billions if not trillions of Euros’ worth of debt in 2012. And this is at a time when even more solvent members such as France and Germany are staging weak and failed auctions.

 
Tyler Durden's picture

Frontrunning: January 5





  • ECB Cash Averts ‘Funding Crisis’ for Italy, Spain (Bloomberg)
  • Bailout talks in Greece ‘crucial’, Premier says (WSJ)
  • Spain sees €50bn of new bank provisions (FT)
  • Fed says expand Fannie, Freddie role to aid housing (Reuters)
  • France’s Borrowing Costs Rise at Bond Sale (Bloomberg)
  • Europe worries linger after French auction (Reuters)
  • PBOC Suspends Bill Sale as Money Rates Rise Before Holiday (Bloomberg)
  • Turkey warns against Shi'ite-Sunni Cold War (Reuters)
  • New capital rules for banks ‘delayed to 2H’(China Daily)
 
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