Art Cashin On The End Of The "LTRO Effect"

Tyler Durden's picture


We have previewed the phasing out of the LTRO effect previously here on several occasions. Now, courtesy of Art Cashin, everyone is aware that the eye of the European hurricane has officially passed, especially in the aftermath of this morning's horrendous Spanish bond auction, which shows that reality is back with a bang.

Spanish Auction Disrupts Europe - This morning, Spain had a bond auction. It needed a flea collar, maybe even two. Here’s a Bloomberg recap:

Spanish Yields Reach 12-Week High on Auction


Spain sold 2.6 billion euros ($3.4 billion) of bonds, near the minimum planned, and borrowing costs rose as the impact of European Central Bank’s emergency lending waned. Bonds and the euro declined.


The Treasury auctioned bonds maturing in January 2015 at an average 2.89 percent, up from 2.44 percent on March 15, while bonds due in October 2016 yielded 4.319 percent, up from 3.376 percent on March 1. Securities maturing October 2020 were sold at 5.338 percent, Madrid-based Bank of Spain said today. The Treasury had set a range of 2.5 billion euros to 3.5 billion.


Spain’s financing costs had been held down by the ECB’s 1 trillion euros of three-year loans to banks, known as the LTRO , some of which have been recycled into high-yielding government debt. Yields had declined as much as 95 basis points after ECB President Mario Draghi announced the policy on Dec. 8 and Spanish banks’ holdings of government debt jumped to 220 billion euros in January from 178 billion euros in November.


It’s back to reality now, the auction shows the LTRO effect has been exhausted and now demand for Spanish paper is becoming much more price sensitive,” Peter Chatwell, a London-based fixed-income strategist at Credit Agricole Investment Bank, said in a telephone interview. – Keith Jenkins, Bloomberg.

This was a rather ugly auction and may set an ugly tone, as European markets look to close for three to five days for Easter.

Watch out!

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Wed, 04/04/2012 - 09:32 | 2316054 evolutionx
evolutionx's picture

Currencies Declining

Since 1971, the value of the US dollar (paper money) has gone down 97.5% against real money (gold). Since Nixon abolished gold backing of the US dollar in 1971, both the dollar and most other currencies have been totally destroyed by reckless government. Nixon should not have been impeached for Watergate. Instead he should have been prosecuted and jailed for destroying the worldís currency system. Concurrently, banking developed into a fractal system whereby banks could lend massive multiples of their deposits and capital. All of this has served to drive up asset prices to totally unsustainable levels.


Wed, 04/04/2012 - 09:38 | 2316072 4realmoney
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Wed, 04/04/2012 - 10:07 | 2316177 Centurion9.41
Centurion9.41's picture

Here's some nice pictures...


Gold, Sheeple.  [Funny how that evolks images of ]

Wed, 04/04/2012 - 10:10 | 2316192 5880
5880's picture

I can earn compounding returns in dollars. Gold produces returns only in price appreciation.

I'm not saying there aren't periods when that price appreciation isn't a great hedge on inflation,

Just saying it isn't a long term investment. It's a hit and run investment with no yield.

Most of these studies are pure price without "total return". Anyone who can do a NPV calc sees thru these scam charts

The island of Niihau was bot for 1,000 oz of gold @100 in 1864. That gold is worth ~$1.6m, Niihau is $1b. Chart that

Wed, 04/04/2012 - 10:33 | 2316277 Toolshed
Toolshed's picture

For those that don't know, Niihau is a PRIVATE island in the Hawaiian chain. I would be curious to know where you came up with the current valuation of $1b. I think you are comparing apples to aircraft carriers in your analogy. Just sayin'.

Wed, 04/04/2012 - 10:44 | 2316311 5880
5880's picture

Reported in their documentary.

It's 44,800 acres, so thats 22,300 per acre. For Hawaii that seems fair

and yes it's private. They chose to trade gold for land. perfect analogy

Wed, 04/04/2012 - 16:22 | 2317488 Toolshed
Toolshed's picture

Who's documentary? I have some very rare pocket lint from a tux that was rented by Rock Hudson early in his career for an awards show. Much rarer than land on an island in Hawaii. So I gues it is worth $1 trillion. See I can do that too.

Wed, 04/04/2012 - 09:34 | 2316059 MFL8240
MFL8240's picture

"everyone is aware that the eye of the European hurricane has officially passed,"


Really Art?  Who is everyone the liars in the financial press or the courrpt cartel printing the money?

Wed, 04/04/2012 - 09:39 | 2316075 mayhem_korner
mayhem_korner's picture



You understand the difference between "the hurricane has passed" and "the eye of the hurricane has passed"?

Wed, 04/04/2012 - 11:00 | 2316395 Carl Spackler
Carl Spackler's picture

if not...the backside of the eye wall is where the REAL destruction comes from

Wed, 04/04/2012 - 12:20 | 2316704 Amish Hacker
Amish Hacker's picture

And from the opposite direction.

Wed, 04/04/2012 - 10:00 | 2316071 mayhem_korner
mayhem_korner's picture



If rising pump prices prevent the CBs from pushing print, maybe rising yields will do it.

Wed, 04/04/2012 - 10:26 | 2316246 Cat Woman
Cat Woman's picture

Only in an election year.


Wed, 04/04/2012 - 09:40 | 2316077 q99x2
q99x2's picture

Where's my union benefits? 3-5 days closed for Easter. Oh forgot Spring break starts this week. Drunken orgy time.

Wed, 04/04/2012 - 10:02 | 2316083 Dr. Engali
Dr. Engali's picture

Looks like uncle Ben is getting the cover he needs to print. I hope it waits until October to fall apart. I have a couple vacations planned and more stacking to do.

Wed, 04/04/2012 - 10:07 | 2316183 ElvisDog
ElvisDog's picture

I disagree with you and agree with Graham Summers. QE has become political. Gas prices are high. Ben starts QE and gas prices will snap even higher. Obama is already being blamed for high gas prices and high deficits. What do you think the Repubs will do with a new, larger round of QE and higher gas prices? It will take much more than a failed Spanish bond auction that 99.9% of the public doesn't know about.

Wed, 04/04/2012 - 10:27 | 2316247 DOT
DOT's picture

QE becoming political only means the lies associated with policy implementation will be much,much larger.

Boggles the mind.

Wed, 04/04/2012 - 10:39 | 2316301 Quinvarius
Quinvarius's picture

Define QE.  I assure you, QE started way before the year 2000 and never stopped.  Nor can it stop.

Wed, 04/04/2012 - 09:59 | 2316163 Centurion9.41
Centurion9.41's picture

No worries, the US equity market is back, Nominally, to where it was at the beginning of the financial crisis.   Why is this important?

So Uncle Benny and his Jets can, as the equity world is again being crushed, have a Nominal equity curve, the S&P chart, in which to point to and say


Sheeples or Bitchez, naming children is such a hard decision ....

Wed, 04/04/2012 - 10:05 | 2316174 Centurion9.41
Centurion9.41's picture

Sorry, misplaced reply.

Wed, 04/04/2012 - 10:24 | 2316238 Barry McBear
Barry McBear's picture

Thanks Tyler, you wouldn't happen to have one of those monthly european auction schedules to post would you?  Might be worth watching them again now that the auctions aren't rigged with LTRO money anymore.

Wed, 04/04/2012 - 10:53 | 2316380 djsmps
djsmps's picture

No one expects the Spanish bond auction.

Wed, 04/04/2012 - 13:41 | 2317023 Snakeeyes
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