ECB Fails To Sterilize Bond Purchases In 4th Failure Of Last 6 Attempts: Harbinger Of Upcoming Unsterilized QE?

Tyler Durden's picture

The last time we pointed out an ECB bond sterilization failure as part of its legacy SNP program was on December 30 of last year (the third in a row), when a liquidity glut led to the biggest sterilization shortfall, one amounting to €39 billion, when only 89 banks submit bids to absorb paper in exchange for a paltry tip. Moments ago, the ECB reported that in just the third such sterilization auction of the new year there was once again a failure to absorb all the €177.5 billion in outstanding toxic peripheral bonds, when an impressive 126 bidders showed up and yet were only able to generate only €152.1 billion in bids, leaving a €25 billion shortfall.

As can be seen on the chart below, this is the fourth failed sterilization since mid-December (and last week was on the margin with just a €1 billion surplus).

Adding this morning's MRO into the picture in which €116 billion was allotted, there was roughly €50 billion in net liquidity injected into the system and confirming that Europe is largely pressed for every incremental spare Euro.

Finally, recall what we said in our last sterilization failure post:

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.

Indeed, judging by the feverish pace of purchases of every peripheral bond available, is this merely just another indication how little the ECB cares about sterilization, and is just a hint at an upcoming full-blown and unsterilized bond monetization about to be launched by Mario Draghi? For now the market has responded with a resounding "hell yeah" especially when one considers a headline that just crossed the wires:


Well, if anything it sure would explain the Fed's willingness to taper... and pass the baton to the BOJ and now, the ECB.


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Oldballplayer's picture

If we are sterilizing stuff, there is a whole list we could come up with.

LawsofPhysics's picture

Banks runs, capital controls and price fixing has been going on for quite a while now, this should surprise no one.

hedge accordingly.

Cognitive Dissonance's picture

Whoops. Missed it by > that < much. Let me try again. Best out of 10 sterilization trys wins.

NoDebt's picture

Speaking of number of trys.... anyone notice how the number of bidders is going up but the sterilizations are still failing?  Yeah, it's a little lumpy looking, but squint and tell me they're not having a harder time of getting it done, despite more participants.

Bearwagon's picture

Forget it! There ain't gonna be any QE as long as the fat lady is chancellor of germany. Count on it!

eddiebe's picture

Not to worry, the FED will make up the difference.

youngman's picture

QE is working for Japan....NOT

Sudden Debt's picture

not because I'm a marketeer....


BUT CALLING IT "outstanding toxic peripheral bonds" DOESN'T REALLY SAY BUY ME NOW DOES IT?!



the not so mighty maximiza's picture

I wounder if this will be the year

no more banksters's picture

EU Parliament for Troika policies:

"Millions of citizens are victims of those programmes. In order to avoid a fracture between institutions and citizens, there is a need for a democratic dialogue ...”

ghostzapper's picture

Passing the baton is the key point here.  Even IF the Fed actually tapers more (personally I don't believe a literal taper takes place behind the scenes but nonetheless I digress) the GLOBAL printing orgy continues and grows.  Same story.  Provide a parachute to keep the sheeple oblivious until one day fiat is irrelevant and defaults are commonplace.  

mrdenis's picture

Bond market Vortex

disabledvet's picture

and i'm long the euro Pound because?

no more banksters's picture

"Similarly, the ECB becomes a corresponding Fed in the European area, “serving” the problematic economies that are excluded from the bond markets, through the print of new money. Therefore, the problematic economies will be loaded with more and more debt which the ECB, i.e. the largest private European banks will hold."