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Record ECB Bond Sterilization Failure
As we observed two weeks ago, Europe's year-end liquidity situation is dire and deteriorating. On December 17, the ECB failed to sterilize its cumulative €184 billion in SMP bond purchases by a whopping €32 billion, the second such failure in one month. Since then things have gotten progressively worse, as banks, already scrambling for year-end liquidity, and eager to preserve their windows well-dressed by having crisp European currency on their balance sheet instead of sterilized ECB bonds on December 31, have led to two more sterilization failures, first a week ago when 103 bidders only indicated interest for €140 billion of SMP bonds, leaving a €39 billion shortfall, culminating with the sterilization failure from this morning, when a tiny 89 banks submit bids for only €104.8 billion in ECB purchased bonds, leaving a record unsterilized gaping hole of €74 billion.
Remember when the ECB's bond purchases were quote unquote sterilized? If this pace continues, in early 2014 the ECB's bond purchases may remain on its balance sheet fully unsterilized. But that's ok - now even Germany is slowly starting to habituate to central bank activity with no fears what this may mean for future inflation. Because it, like subprime, is contained.
Finally, since even the theatrics of ECB's bond buying sterilization are fading, can it be long before the ECB proceeds to monetize debt outright, and unsterilized? According to BNP, the answer is a resounding no.
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#FAIL
Special thanks to Mr. Praet - ECB
"ECB Admits Sovereign Bonds Are Not Riskless"Well it's about time they got with the program and did some full-on unsterilized QE to boost the economy.
- Ben Bernanke
This is not a problem as the bank account holders have lots-o-money to steal. Get with the program.
A gaping hole is better than none.
Obama will testify to that one too.
"Get Epson customer service on the phone STAT! These %$#%@#$@! printers Bernanke sold us don't print Euros!"
Couldn't happen to a nicer bunch of scumbag banks and Central bankers.
DIAF
but... but... I thought EVERYONE monetizes debt?
The Europeans will monetize because:
imo you are right on principle, then what the FED is doing is like playing Monopoly where one player can just lend as much as she wants from the bank, and bid all streets higher and higher until she has bought them all
but you are wrong on the FX Swap front, that "help" (which imo it was more to help US Primary Dealers, domestic and foreign) has long been reversed
the game starts with Uncle Sam's funding needs. then goes on with the megabanks' funding needs. and then, after a long list of other considerations, at the very end come the periphery of the empire's needs
until we all eventually revert to balanced budgets, both public and private. you know, in the barbaric fashion of "spending within your means"
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this article just highlights how cunning the FED's strategy is: 75 billions per month, every month, automatically on the FED's balance sheet sound way less dangerous than 70 billions that may (Tyler's take) or may not, (sterilized or not) be on the ECB's balance sheet
Ghordi - I agree with you...in principle.. The FX swaps were done to fund the ECB's funding needs months ago. They are indeed finished ... for now anyway.
The ECB is desparate not just from their funbding requirements (and their Banks) but from an econmic perspective ((un)employment, asset prices...etc..). Thus the "non sterilization" of their purchases (EUR) is not worrying the ECB too much. They WANT "a bit of inflatiion"....y'know... the good kind of inflation where people get a little happier and the Media gets to crow about recoveries and such... before energy price crisis and / or war.
I don't think the Fed's strategy is that cunning... they just have the banks on board right now... Yellen will be smellin' those banks reserves ....wanting "just a little of the good inflation"...y'know...
I just heard Bob Piss-on-me say that Central bankers of the world should be on Times cover for Man of the Year.
EDIT: I had the overwhelming urge to throw my remote though the TV screen.
BAIL INS COMING SOON !!!!
Fucking Europe, useless bunch of welfare socialists.
Whereever you are, or think you are,
THERE IS NOWHERE LOWER THAN THE VERY BOTTOM.
Not far to go now.
Hope you're in Europe, if not then that like the US pot calling the European kettle black.
@Colonel Klink.
U.K. today, not entirely in Europe.
Nowhere even near would be my ideal, but Greece is calling.
Agreed but it was a generalization for Europe.
http://www.myfoxdc.com/story/24326123/greek-prison-system-collapsing-lab...
Yep!
Mainland Europeans are quite comfortable not bathing for a couple of days. Unsterilized QueE (European version) should be easily accepted as being part of the special European culture.
that's a load of crap but I hope you feel better now
Dude - I wasn't talking about Mercedes owners in Europe. I know they bathe daily....
Bitte mach dir keine Sorgen.
S'il vous plaît ne vous inquiétez pas.
Bless you. Sometimes I sneeze like that too.
Wow, three down votes, that must mean three moochers on site.
Are you worried you might get thrown off the gravy train?
Euros are rare, just like bitcoins. Cannot be reproduced easy. The sky is the limit. Better get them now.
Eurofornstar 2014
why sterilize if eur is high then it loses competitivenes. ECB will never allow Eur > 1.5
if Eur>1.4 print
if Eur <1.3 sterilize