European Stocks & Bonds Battered By Return Of LTRO Stigma

Tyler Durden's picture

When the ECB first announced the LTRO in late 2011 (and executed in early 2012) we explained how the ECB's encumbrance via this 'aid' is in fact a major negative for the rest of the capital structure. We were proved correct and even as Draghi lied and stated there was no stigma, the market priced the LTRO-encumbered banks notably weaker. Of course, the banks with the greatest need for support were the ones who grabbed the ECB's punchbowl that time and it seems as fears re-awaken in Europe, risk-appetite towards these ECB-dependent banks (relative to non-LTRO banks) is waning rapidly. The so-called LTRO Stigma (the spread between LTRO and non-LTRO bank credit) is back at 5-month wides as investors rotate away from any and every bank outside of the core. This weakness rubbed off everywhere in Europe as Italian and Spanish bonds saw their worst day since the Italian elections as European stocks slumped and Europe's VIX is now 4.5vols higher than Monday's open.


Banks are trading at their widest spreads in 5-6 months... and the stimage for LTRO names is clear


and the safety bid is now in Bunds and NOT in Swissie as 2Y Bund yields compress through swiss for the first time ever...


and while European stocks rose gently into the close, European sovereigns did not (at all)...


Italian bond spreads are now at 3 month wides over 350bps and Spanish bond yields back over 5%


Charts: Bloomberg

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camaro68ss's picture

Bank holidays for Italy and spain (pain) for the 3 day weekend?


As everyone celebrates the resurrection of Christ, the devil confiscates half your deposits  

bank guy in Brussels's picture

Yes, co-ordinated with another 'crisis meeting' of the Eurogroup

And more market-churning pronouncements from Dutch boy Dijsselbloem Diesel Bomb

Doing a good job of seeing the euro-zone terminally explodes sooner rather than later

Ahmeexnal's picture

Nazi submarines loaded with red mercury found in norwegian waters:

The wreck of a German World War II submarine that was sunk with 48 people on board has been found off Norway's coast during work on an oil pipe, a maritime museum official said on Monday.

The "U-486" lies some two kilometres from the German "U-864" submarine, which was also sunk in 1945 with dozens of tonnes of mercury on board, a dangerous cargo which has caused concern for years.

Haywood Jablowme's picture

BTW, bitcoin @ $88.8 


Ahmeexnal's picture

Douche Bank is about to collapse, pushing europe over the edge into a chaotic hyperinflationary nightmare:

International ratings agency Standard and Poor's put the biggest German bank's long-term credit rating on negative watch Wednesday after Deutsche Bank's 2102 earnings were hit by writedowns and legal costs.

We can only hope and pray the mechanisms are put into place in order to contain hyperinflation to the eurozone alone.

earnyermoney's picture

The cypriot deposits will fill the holes in DB's balance sheet.

achmachat's picture

please find me a description of red mercury and what it's good for.

mercury-antimony does not count though...

Tinky's picture

Guess it's finally time to stop eating those delicious Norwegian Tuna Melts.

walküre's picture

Wondering what type of eggs they will find?

howenlink's picture

<-- Peter Schiff
<-- Lou Dobbs

Hijack.  Couldn't resist.

redpill's picture

Schiff is always good at bringing clarity to a situation.  Stealing savings through deposit confiscation today is little different than stealing savings through ZIRP and inflation over time.  The primary difference is psychology and perception.  I just wish people would get as pissed off about inflation since it is every bit as much thievery as deposit confiscation is, if not more.

Son of Loki's picture

Good point RP,

...savers are getting whacked with 6-10% inflation per year lose of purchasing power for the past several years. Add to that, retirees got zero COLA for the past several years and only 1.6% this last year. It has to be painful for seniors who depend on SS for a living. Add to that rising food prices...Yiks!

gball's picture

What wasn't said is Cyprus is getting both.


Low interest rates on deposits and a levy.


Cyprus isn't getting either or.  It's getting both.


Love Schiff.  And Dobbs was horrendoues there.  But it seems like Schiff was saying that being honest is better.  but missed that Cyprus saver's are getting crushed by low interest rates and levies.

gball's picture

Woohoo.  Europe closed.


Time for ES and DJIA to ramp up boys.  We got an all time S&P500 close coming up.


Does it make sense?  No!


Will it happen?  Let's say I wouldn't bet against it at this point.

DavidC's picture

Over $4 billion of POMO might help.


Kirk2NCC1701's picture

Paging Dr. Goldfinger, Dr Goldfinger. Blue light special on Gold in Fed Aisle. Supply Limited. Sorry, no rain checks/cheques.

Son of Loki's picture

Correction, amigo:


<<Of course, the bankers with the greatest need for support were the ones who grabbed the ECB's punchbowl that time>>


Afterall, yachts need refursihing, wives need new Lambourghini's, kids need iPad18, and so on....mistresses, Villas, resorts, 7 course dinners, ....."support."

Legolas's picture

Unabashed government intervention in the markets has skewed the validity of so many of these numbers that it's hard to assess their reliability.


Sigh ....

Urban Redneck's picture

It should be a Stigma.  Any bank obligation to the ECB takes seniority over bank deposit holders.  So the bigger LTRO balance at any given bank, the further down the credit chain the bank's depositors (bag holders) are.   

toys for tits's picture

Since the headline is that gays are arguing at the Supreme Court. Here is a photo of Bernanke's new gay helicopter.

Madcow's picture

there's just no way to stop the deflationary collapse.  

they can destroy the currency via inflation - or they can destroy the currency by simply seizing / confiscating it 

but no matter what they do, the enderlying economics get worse and worse and worse and worse and worse and worse and worse and ...


soon enough, the US marines will be air-lifting giant sacks of grain - somalia style - to the starving multitudes gathered in champs-d'elysee -


the most humane course of action may be to simple get predator drone on the entire continent - and put her out of her misery. 

NoWayJose's picture

Thanks D-Boom!  Thanks Troika!  You just hastened the collapse of all the peripheral banks in the EU!

Khali_Hath's picture

US market:- How rising USD and GAS prices could help US stock markets?
Why US markets are stil holding their grounds despite overbaught and all types of negativity?

bnbdnb's picture

They don't.

Printed money with added leverage continues to press it higher.

BullyBearish's picture

Bankers never lose...they are winners!  But they are hated.  They have always been hated.  No wonder they try to convince us that they are victims...hoping to forestall the time when they actrually do become victims.

Mototard at Large's picture

Derivatives are financial weapons of mass destruction which could unwind during a crisis. Here is a simple explanation of what they are and why they can be both good and dangerous. It is written in plain language so a non-specialist can read it without a dictionary.  With the current “difficulties” in Cyprus about to spread, it will be curious to see if derivatives raise their ugly heads again. Who knows how much exposure the TBTF banks have once things unwind a bit?

Kirk2NCC1701's picture

Nice article. What it fails to say in its closing, is that the sheer size of the Derivatives market will crash EVERYTHING. When the stated value is many multiples of the world GDP, there can be no way to save them.

At that point, the entire global fiat banking system collapses into itself (a black hole). Only ppl holding cash, PM and currencies tied to real assets will survive.