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Cue Panic As Fed Resumes Liquidity Swap Lines, Lends $200 Million To Swiss National Bank, Most Since October 2010

Tyler Durden's picture




 

If yesterday's news broken by ZH that one bank was in dire need of US dollars and ended up borrowing $500 million from the ECB was enough to send the market down almost 5% today, then the follow up news that the FRBNY just reactivated FX swap lines with Europe will likely send ES limit down at tomorrow's open. The FRBNY has just announced that in the week ended August 17, it lent out $200 million to not the ECB, not the BOE, but the "most stable" of all banks: the SNB. This is the first use of the Fed's Swap Lines since March, and the most transacted under this "last ditch global bailout swap line" (see more on how the Fed bailed out the world using swap lines here) since October 2010. This event also gives us a hint that the European bank in question in dire need of cash is Swiss, which in turn means that it is not some usual PIIGS suspect, but one of the two "big ones." If true, this means that the European insolvency, liquidity and what have you crisis is about to take an exponential step function higher.

From the FRBNY:

And the history of FX swap usage:

 

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Thu, 08/18/2011 - 20:10 | 1575208 buzzsaw99
buzzsaw99's picture

I meant to ask how much interest is the fed going to pay the snb for taking the loan. it was sarcastic but was ruined by missing words.

 

edit: btw, thank you for the link. very professional.

Thu, 08/18/2011 - 17:29 | 1574832 St. Deluise
St. Deluise's picture

I'd have to see more data but there seems to be a bullish correlation to fed FX swaps and US equities.

1/10 to 3/9/11 = +4.21% SPY

3/9 to 8/10 = -10.73%

3x that amount from 8/27 to ..forever = ?

Thu, 08/18/2011 - 17:37 | 1574874 trader1
trader1's picture

appears to be a slightly bearish correlation of FX swaps to gold as well, but only temporary

Thu, 08/18/2011 - 17:32 | 1574856 bill1102inf
bill1102inf's picture

Since commodities are money and gold is one of the most useless forms, why is most every commodity going down except gold???

Thu, 08/18/2011 - 20:21 | 1575276 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

You can keep your bushels of corn.  I'll keep my "useless" gold.  You can't eat corn! 

(GMO corn that is:)

Thu, 08/18/2011 - 17:43 | 1574891 davepowers
davepowers's picture

reading this caused me to check out the Fed's latest balance sheet which is just out

As of yesterday, the US Treasury had less than $9 billion at the FEd, where it has essentially all its cash.

Holy moley!

 

Thu, 08/18/2011 - 17:47 | 1574899 slewie the pi-rat
slewie the pi-rat's picture

the FED is not gonna let the EU banking system fall apart.  yet?  i mean germany isn't even on their hook, yet.  well, maybe that isn't exactly right, ok?

let me say that even tho germany appears to be hooked, the bankster in the chair holding the rod, on that gorgeous fuking motorboat with all the wondrous electronics, is playing it very, very carefully...

damn!  that is some heavy gear!  good luck, germany!

Thu, 08/18/2011 - 17:55 | 1574922 Late to the party
Late to the party's picture

Is it possible that this could be a feint? If the name of the game is to stop the appreciation of the swiss franc and it cant be done directly (or with decreasing effect) could this action be used to undermine the gloss of switzerland as a safe haven. 

If the goal is purely to shake confidence then you may as well only use a small amount. 

Or is that preposterous? I'm new here :-)

Thu, 08/18/2011 - 21:36 | 1575527 chunga
chunga's picture

This must be some sort of trick. We just got downgraded by super-smart Standard Poors and we're now lending to the Swiss??

Fri, 08/19/2011 - 00:44 | 1575800 DosZap
DosZap's picture

Wasn't it Moody's who said we're a/ok?.

And France(LOL) is rated AAA?.

France............

Thu, 08/18/2011 - 17:58 | 1574935 irishlink
irishlink's picture

Something is definately rotten in the state of Denmark ............. thank you Sheakspeare. This money was almost definately routed through Switzerland to either distract or confuse.

Thu, 08/18/2011 - 18:03 | 1574953 irishlink
irishlink's picture

The money was for Denmark. Their banks have been selling assets over the past week as they cannot raise money in the market. As they are outside the eurozone they are using Switzerland to raise the money. They would not be able to tap the ECB?

Thu, 08/18/2011 - 18:21 | 1575007 NumberNone
NumberNone's picture

Good point.  Denmark facing another financial Amagerbanken?

http://online.wsj.com/article/SB10001424052748704422204576129910427759674.html 

Thu, 08/18/2011 - 18:07 | 1574972 SwingForce
SwingForce's picture

Too bad Tyler has to read thru this bullshit to get to the 1 good post that poses a real cerebral challenge...

Thu, 08/18/2011 - 18:35 | 1574977 SwingForce
SwingForce's picture

Look up yearly charts of ED PEG SO D PCG XLU & IYR and tell me if SNB wouldn't like to own these INCOME STREAMS?

Last year, these stocks ran AFTER Jackson's asshole, this year its BEFORE. So scarrrry, oooh, sell my SPX stocks and run to 10 year junk @2% (that's 20% after 10 years). If the top 10% owns 80% of stocks, and can't be bothered to manage their portfolios, then its mutual fund managers of the world who are trying to scare us as they reposition. Fuck them and fuck you if you let them scare you. Its bullshit.

Thu, 08/18/2011 - 18:38 | 1575054 swissaustrian
swissaustrian's picture

This is a false flag to suggest that something is wrong in Switzerland. The purpose is to weaken the CHF. It will work way better than any intervention.

Thu, 08/18/2011 - 18:44 | 1575067 Gibu The Great
Gibu The Great's picture

So it will last two hours instead of one?

Thu, 08/18/2011 - 19:04 | 1575119 swissaustrian
swissaustrian's picture

If you look at the last liquidity flood, you´ll see that the USD/CHF went from .70 to .79 and EUR/CHF from 1 to 1.14, so I wouldn´t say that it had a half life of a few hours.

My argument is that the efficiency of a public 200 mill. $ loan in terms of fx movements might be way bigger compared to the hundreds of billions that SNB printed so far.

Thu, 08/18/2011 - 19:11 | 1575133 Gibu The Great
Gibu The Great's picture

I was being facetious, but you may well be right.  

Thu, 08/18/2011 - 18:45 | 1575073 Its_the_economy...
Its_the_economy_stupid's picture

archived

Fri, 08/19/2011 - 02:43 | 1576043 MsCreant
MsCreant's picture

archived

Thu, 08/18/2011 - 18:46 | 1575074 Jason_1sandal
Jason_1sandal's picture

Maybe they needed it to buy 4 1/2 tons of gold to send to Chavez...

sarc/off

Thu, 08/18/2011 - 19:02 | 1575110 High Plains Drifter
High Plains Drifter's picture

isn't this kind of a QE 3?

Thu, 08/18/2011 - 19:28 | 1575177 mfoste1
mfoste1's picture

SNB: "Weez iz now bwoke, can we pleeze haz some monies?"

Thu, 08/18/2011 - 19:30 | 1575182 chump666
chump666's picture

A emergency swap line with the SNB?  that is super bearish news right there.

Could indicate the ECB is in trouble.

Thu, 08/18/2011 - 19:39 | 1575196 razorthin
razorthin's picture

The wonder of it all is that not matter how bad it really gets - it's all been thunked out

Thu, 08/18/2011 - 20:17 | 1575273 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

+1

Thu, 08/18/2011 - 19:44 | 1575201 web bot
web bot's picture

This is like skydiving in slow motion... without a parachute.

Maybe there is something to that Mayan and Catholic mystic prophecy afterall?

Unbelievable...

Thu, 08/18/2011 - 20:06 | 1575253 navy62802
navy62802's picture

They may have been off by a year. I could of course be wrong, but I see this global fraud crisis coming to a head by the end of 2011 at the latest.

Thu, 08/18/2011 - 20:34 | 1575312 Snake
Snake's picture

it seems to be easier to believe in the end of the world than in the end of capitalism, no?

Thu, 08/18/2011 - 20:53 | 1575359 tip e. canoe
tip e. canoe's picture

the end of the Mayan Long Count never marked the End of the World, but the end of a very looooonnnngggg age...and the beginning of a new one.

Thu, 08/18/2011 - 21:34 | 1575528 navy62802
navy62802's picture

Not really. Contrary to what Hank the Idiot Paulson says, the world will not end if the economic system collapses. The economic system exists to serve people, not the other way around. People survived the Great Depression. People survived the Weimar Republic. People survived in Zimbabwe. And we'll survive here in the USA. It will certainly be painful; there may be blood in the streets, but we'll survive. As will people in Europe.

What I find easier to believe is that regimes of fraud eventually tumble to their demise. Will capitalism survive the fraud apocalypse? I don't know. I'd put the chances at 50-50. And I'll also say that I don't see our predicament as a necessary outcome of free market capitalism. We haven't had a free market for many decades. It's too bad that most people don't realize that fact and will ultimately blame capitalism for the misery they are about to experience.

Thu, 08/18/2011 - 20:54 | 1575355 tip e. canoe
tip e. canoe's picture

actually, there's a theory floating around that the Mayan Long Count ends on 10-28-11:

http://calleman.com/content/articles/5thNight_9thWave.htm

http://www.youtube.com/watch?v=tsak0fG6WE4

Thu, 08/18/2011 - 21:46 | 1575569 delacroix
Thu, 08/18/2011 - 19:50 | 1575220 winning
winning's picture

santelli just reported this on cnbc ...

Thu, 08/18/2011 - 19:55 | 1575233 navy62802
navy62802's picture

I think what this means is that there's going to be some sort of major announcement out of Europe this weekend. The central banks are making what are ostensibly major moves, as signaled by the $500 million and $200 million of loans over the past 24 - 36 hours. In order to lessen the impact of what is sure to be bad news, whatever is going to be released to the press will be released this weekend ... or on Friday afternoon/evening after all global markets are closed.

Thu, 08/18/2011 - 20:15 | 1575270 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

Max Kaiser said on The Alex Jones Show today that Societe General holds all of AIGs derivatives to the tune of $600,000,000,000.000.00.  Societe General's market cap has dropped from over $100,000,000,000 to just $16,000,000,000 today.  If this bank goes down it may be LTCM X 100 and look out beeeeeeeeelooooow.  We ain't never seen a deflationary spiral the likes of which that would create!

Thu, 08/18/2011 - 20:09 | 1575251 Element
Element's picture

"... but one of the two "big ones." If true, this means that the European insolvency, liquidity and what have you crisis is about to take an exponential step function higher. ..."

 --

Ok, so this is THE genuine 'popcorn moment'? One of two "big ones" kaput?

One could get through a LOT of popcorn via this present exponential step function ...

 

PS: That Oct 2009 write up was fantastic Tyler.

Thu, 08/18/2011 - 20:18 | 1575264 The Heart
The Heart's picture

Game on!

CNN Poll.:

Ron Paul 63.76%  (4,136 votes)
Rick Perry 21.58%  (1,400 votes)
Mitt Romney 4.73%  (307 votes)
Michele Bachmann 3.48%  (226 votes)
Someone yet to enter race 4.92%  (319 votes)
Other 1.53%  (99 votes)

Ongoing...mark your mark now!

http://www.foxnews.com/on-air/fox-friends/index.html

 

Thu, 08/18/2011 - 20:25 | 1575286 knukles
knukles's picture

OK.  Media Test....
That's the results.
How long will it take to conjure up another story to divert attention away from Ron Paul.
Say, a story about the hard fought 3 way battle for second without mentioning second nor first.
The moment he's not marginalized and starts getting some real air time.... watch out!

"I was tea party when tea party was uncool"
                               -read here on ZH

Thu, 08/18/2011 - 20:30 | 1575299 Element
Element's picture

LOL > 300% in front of the next highest!

Ok ... let's ignore the crazy old coot ...

Democracy bitchez!

Thu, 08/18/2011 - 20:13 | 1575265 Everybodys All ...
Everybodys All American's picture

CS is number 3 here http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2011/08/Canada%20Risk.jpg

Tier one is not exactly giving a whole lot of leg room for say a liquidity event now is it.

Thu, 08/18/2011 - 20:22 | 1575277 knukles
knukles's picture

Nope, not CHf intervention, because that would raise dollars (other FX).  The dollars (other FX) needed if they were buying CHf... (not right now Twattles I've a head ache)
So, why the need for US$?
In front of our noses!

US branches of foreign banks.

Say Swiss Bank Numbnuts (just using Swiss as they're the nswap counterparty) announces fuck all's falling apart, End of Business Days, then they'll have a run on US$ here in the US, so, mayhaps, the End of Business Days bank is (in order to protect leak of bad information as to specifics) using the SNB as the vehicle to procure the short term funding in case of liquidity squeeze.

Viola!
Occam's Razor in action, fits with news of last few days, too.....

 

Thu, 08/18/2011 - 20:23 | 1575279 Stumpy
Stumpy's picture

Question about volatility:

We can see volatility (at least VXX) as the increase of the options premium. It's also an indicator of the sentiment of the market.

Can we also imagine a volatility-driven financial system? You know, where it's not a measurement of the state, but a parameter that is controller by whatever phD in whatever bank or country. And the harvesting begin.

Thu, 08/18/2011 - 20:30 | 1575296 chump666
chump666's picture

watching suckers getting decimated buying into bulltraps/dips on Asian markets. Jeez EZ is a c-hair away from a major FUBAR trade.

 

Thu, 08/18/2011 - 20:39 | 1575331 lookma
Thu, 08/18/2011 - 20:53 | 1575362 johnjb32
johnjb32's picture

That truly leaves me speechless...I think everyone can feel the colossus roller coaster drop is coming

 

http://goo.gl/25cDy

Thu, 08/18/2011 - 20:54 | 1575363 justtotaketheedgeoff
justtotaketheedgeoff's picture

Maybe this is all part of the plan.  The markets need to crash far enough to provide political cover for QE3 in the form of people begging for more liquidity. Never mind that it's a solvency problem. What better way to spook people than to indicate trouble in Switzerland.  Not sure it's enough to trigger the thousand point drop on the Dow they'd love to have though.

Thu, 08/18/2011 - 21:42 | 1575552 deflator
deflator's picture

So much for "Swiss neutrality" bitchez!

Thu, 08/18/2011 - 21:59 | 1575612 choorles
choorles's picture

“To some this downturn may seem like a destructive event, the economic crisis is actually a constructive event that paves the way for the future [silver, gold, bitcoin] … The stability of several major European banks has been seriously threatened and government leaders are in constant teleconferences to discuss how to halt the crisis. The US, on its part, has lost its status as AAA and 7 trillion dollars of stock value has gone up in smoke … Yet, a downgrading of the US creditworthiness and the loss of 7 trillion dollars of stock value really does not mean anything except that the numbers associated with certain papers have been depreciated. It is thus essentially correct when commentators say that so far the crisis has not had any effect on the ¨real economy.¨ The recent fall in the markets simply shocked the mental duality between abstract values and real values. There is however no reason to expect that it will be possible to limit the crisis to the ¨unreal economy¨. Thus, I expect that now also the real economy will be hit. How quickly this will actually manifest is hard to tell but I expect that events will lay the foundation for massive unemployment in many major Western countries (It is of course high already, but for many it has still been possible to keep on with the previous lifestyle). I also expect that there will be a large runaway from the stock markets and the stability of currencies will be negatively affected to a point where new radical solutions need to be considered … I think it is realistic that there will be some kind of political reaction to the developing chaos” - Carl Calleman

http://dont-tread-on.me/money-banksters-and-august-2011-%E2%80%93-the-coming-silver-revolution/

Thu, 08/18/2011 - 22:24 | 1575712 cognus
cognus's picture

the mother of all margin hikes is just in the wings now, but they need a good volume-faux-break above resistance to make it lucious.

huge worldwide swoon coming sept/oct... one of those where every thing... every thing including jo momma, gets sold... everything... swiss francs, loonies, gold for sure, silver at 20, t-bills FINALLY assuming room temp, C & BAC sacrificed on the altar...  Obama and little Timmy to the rescue

Fri, 08/19/2011 - 01:34 | 1575911 Sequitur
Sequitur's picture

Why would gold and silver be sold, it will be one of the few value stores, along with food, water and oil . . . .

Fri, 08/19/2011 - 03:59 | 1576139 jomama
jomama's picture

i'm not for sale.  maybe for rent, though.

Thu, 08/18/2011 - 22:10 | 1575660 Ned Zeppelin
Ned Zeppelin's picture

Is $200MM a lot of money in these circles? seems like a rounding error.

Thu, 08/18/2011 - 22:18 | 1575690 cognus
cognus's picture

someone's wife needed a bolt-on job

Thu, 08/18/2011 - 22:14 | 1575672 mt paul
mt paul's picture

maybe the Swiss 

will trade 

 gold foil covered

chocolate coins ...

for fresh printed

fiat dollars....

Thu, 08/18/2011 - 22:17 | 1575684 cognus
cognus's picture

Look... this post is old thinking.  ancient... like 2008

Did anyone see T-bills [that would be USA] today?   and, IF the Swiss had real issues, would such a loan facility be publicized by Babylon herself?

Nay, friends, this is all carefully-scripted to quickly bring about the central Soviet of Europe - the very "Externalizaton of the Hierarchy" that matters.

nevermind the 6% DAX drop... what does it matter? if those pesky Germans aren't subdued they'll end up undermining china.  Europe needs a Holy Roman Loanshark-in-Chief, and they will have one very soon.

Thu, 08/18/2011 - 22:27 | 1575731 franzpick
franzpick's picture

Chartwise, FWIW, the devil is oftentimes in the details, namely today's trannies at 4299 atop the downside leaderboard, the only major index taking out the 8/5 lows, and pointing to 1 year, round number horizontal support at 4000: the bad news being that that support level is down another 7%:

http://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=Index&symb=djta&time=9&startdate=1%2F4%2F1999&enddate=8%2F18%2F2011&freq=1&compidx=aaaaa%3A0&comptemptext=&comp=none&ma=3&maval=50&uf=0&lf=1&lf2=0&lf3=0&type=2&style=320&size=3&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=11&x=39&y=12

Fri, 08/19/2011 - 00:34 | 1575773 monopoly
monopoly's picture

If they need the money, as it appears they do, then it is match, set, point. Game over.

Fri, 08/19/2011 - 00:35 | 1575780 Bear
Bear's picture

UBS down 8.5% today

Fri, 08/19/2011 - 01:48 | 1575942 chump666
chump666's picture

...and Deutsch bank looking very much BoA/Citi group re: 2008.  What is messed up about all of this, apart from the insolvency/debt/EZ recession/social upheaval etc etc etc/ EZ is gonna have one helva banking crisis...Should flip China out since greedy Euro banks pumped billions into Asian investments.

Totally FUBAR situation unfolding.

Fri, 08/19/2011 - 00:46 | 1575812 DosZap
DosZap's picture

In the scheme of things, 200mn is not much dough, something stinks.If it was Billion, yeah..................million?.

Pocket change to SNB.

Fri, 08/19/2011 - 01:35 | 1575914 Sunshine n Lollipops
Sunshine n Lollipops's picture

Yodel-odel-ay-ee-ohhhfuuuuck!!!!! Klaus, I tinks I may haf chust scheissed my lederhosen.

Fri, 08/19/2011 - 02:04 | 1575976 Boston Wealth
Boston Wealth's picture

Now that's a stretch!

 

...the follow up news that the FRBNY just reactivated FX swap lines with Europe will likely send ES limit down at tomorrow's open.

 

So we should see ES down 55 by open.. hardly!

Fri, 08/19/2011 - 02:42 | 1576041 Negro Primero
Negro Primero's picture

UBS-FX Morning Adviser   19 August 2011
 Currency Views

EUR, CHF  Targets: EURUSD 1m 1.40 3m 1.40; EURCHF 1m 1.20  3m 1.25

  "The New York Fed announced that the SNB had tapped the Fed’s dollar swap lines for $200 million in the week ended
Aug. 17. The news suggests that at least one Swiss bank may have experienced a dollar shortage during the past week
but was unable to meet its needs in the market. The line has not been used since at least May 2010, and follows
revelations that a single unidentified Eurozone bank requested $0.5 bn from the ECB yesterday. Given that
commercial banks who ask their own central banks for the Fed’s dollars must pay dearly (Fed effective + 100 bps) for
the privilege, swap line activation is an indication that all is not well in dollar funding markets. However, investors
may take some comfort from the fact that, at $0.7 bn in total, current usage of Fed swap lines is much lower than the
$550bn worth of activity seen at the peak of the crisis."       

Fri, 08/19/2011 - 02:46 | 1576050 chump666
chump666's picture

God the french are butnuts...

Fri, 08/19/2011 - 03:05 | 1576066 Sambo
Sambo's picture

Time to run to the nearest nuclear bunker (if you have one) when the secret meeting happens friday night somewhere in New York bringing together anxious members of the Fed, Wall St & the Govt: Dudley, Geithner, Bernanke, Blankfein, Dimon, Pandit & Moynihan.

Fri, 08/19/2011 - 03:25 | 1576096 Sequitur
Sequitur's picture

B of A cutting 10,000 jobs. When the B of A board is reviewing the quarterly statements, I wonder, do they ask, "did a cow shit in here"?

Fri, 08/19/2011 - 04:04 | 1576120 jomama
jomama's picture

.

Fri, 08/19/2011 - 04:07 | 1576147 steveo
steveo's picture

Comet Honda?  Causing Earthquakes?

Honda is a rock around 3/4 Mile in diameter and it passes closer to Earth than almost all other big things.  It just passed 3 days ago, there was 10 minutes ago a 6.8 around 40 miles from Fukushima. 

I combined the previous close passes of this comet, using NASA data, and Earthquake data from USGS and the results are astounding.   The close pass dates to the Earth are highlighted in Blue, and the Earthquake Dates are highlighted in yelllow, and I list surrounding earthquakes so you can get some idea of how many big earthquakes there are per year, to judge relevance of being close to comet passing.

http://oahutrading.blogspot.com/2011/08/comet-honda-causing-earthquakes....

 

Fri, 08/19/2011 - 04:16 | 1576155 Sequitur
Sequitur's picture

Banks gettting crushed in the overnight. CNBC talking heads asking for "global response."

Fri, 08/19/2011 - 05:11 | 1576207 Sambo
Sambo's picture

http://www.reuters.com/article/2011/08/19/china-fed-jacksonhole-idUSL4E7JJ1Y220110819

China not interested in the Jackson Hole meet....yawn....

Fri, 08/19/2011 - 07:00 | 1576283 Instant Karma
Instant Karma's picture

There was a post here just yesterday? About the net equity of various large banks. The post highlighted problems in Canada, remind me to short EWC, but had PIIGS banks, Swiss banks, French and German banks. The problem with the relatively huge size of the few dominant banks in Europe is their poor states of capitalization plus their ownership of bad sovereign debt. They probably own a few bad mortgages as well.

Fri, 08/19/2011 - 07:24 | 1576330 j0nx
j0nx's picture

.

Do NOT follow this link or you will be banned from the site!