This page has been archived and commenting is disabled.
ECB Agrees On €20 Billion Weekly Upper Limit To Sovereign Bond Purchases
In diametrical contrast to the rumor that the ECB and the IMF would collaborate to bail out the insolvent continent whereby the ECB prints and the IMF distributes, something which every German on record has said will not happen, we now get news from German newspaper Frankfurter Allgemeine that the ECB has agreed on a €20 billion cap on sovereign debt purchases: something which means all chimeras of an all out monetization orgy can once again be summarily short down. Bloomberg reports: "European Central Bank governing council members have agreed on a 20 billion-euro ($27 billion) weekly upper limit for sovereign debt purchases as resistance among members grows, the German newspaper Frankfurter Allgemeine Zeitung reported. The ECB council meets every other week to decide on an upper limit for bond purchases used to stem rising yields as the European debt crisis widens, the newspaper reported, without saying where it obtained the information. Members met again late yesterday to discuss lowering the level, FAZ said. Council members from the Netherlands and Austria have added their voices to skepticism over the bond-purchase program, the newspaper said. Those objecting to buying include Bundesbank President Jens Weidmann, Executive Board member Juergen Stark and Yves Mersch, governor of Luxembourg’s central bank, FAZ said." Ah, to loosely paraphrase Amadeus, "the Italians Germans... Always the Italians Germans."
And from the FAZ, Google translated:
In the markets, many investors cherish the hope that the European Central Bank (ECB) on the creditor of last resort for the euro countries and their purchase program dramatically expands. But within the Council of the ECB, which comprises the six members of the Board and the 17 national central bank governors, the resistance is growing against the program. Advocates for the abolition still only a minority, including the German Bundesbank President Jens Weidmann, the Luxembourg central bank governor Yves Mersch and ECB director Juergen Stark.
Also Council Members from the Netherlands and Austria have recently been critical. The majority for a continuation of the program is so fragile. On top of that seeps through now that the Council every two weeks agreed to a ceiling on the weekly bond purchases.
Could very existence of this limit, which exists since the beginning of the program is in central bank circles treated as a secret because they fear that this is to encourage speculation. According to the Frankfurter Allgemeine Zeitung, the growing skepticism in the Governing Council towards the loan program has meant that the ceiling was lowered to 20 billion €.
This Thursday, the Governing Council met and also negotiated a further reduction. The result of the vote was at the editorial close unofficially not to bring in experience. A spokeswoman for the ECB would not comment on the matter. The bond purchase program was launched in May 2010, initially in favor of Greece.
Instead, the Council of the ECB appears to impose a countervailing trend. For the past week, as yields on Italian government bonds at times 7.5 percent reached, had some market participants suggested spending 20 to 30 billion euros - as it turns out, would have been so much covered not by the decision of the Governing Council.
Instead, had intervened, the ECB and national central banks of the euro system with only 4.5 billion euros. In his first public appearances also tried the new ECB president Mario Draghi to dampen expectations. Only required banks and investors that the Fed intervene with a lot of money. But if they only do this, it would mean they would no longer be credible, it said in the past few days surrounding the ECB.
We give the machines 15 minutes before they comprehend the significance of this news.
»
- 7264 reads
- Printer-friendly version
- Send to friend
- advertisements -
Wow, just 0.96 trillion € of monetization every year. Price stabeleteeeeee!
20 bil./wk is quite a bit, no? The last failed Spanish auction only tried to raise 4 billion. The ECB could have bought the whole thing, and then done the same every day of the week.
What I'm guessing is that there is a hell of a lot more debt that is already floating out there which is causing insanity with their yields so them covering the new issuances wouldn't help much. But I'd be interested in hearing someone's explanation because it does seem like it would cover their new issuances so while it would be lipstick on a pig would it be enough to kick the crisis down the road a little bit longer.
The 20 bil/wk limit (i.e. target) applies to ECB meddling in the primary and secondary markets. When you see the PIIGS + FAAArce yields soaring, its the ECB that jumps in to the rescue. This capacity to rescue now has an upper limit....thats the "comprehend the significance of this news" TD's talking about
CM
6 weeks until Xmas, i.e. €120 billion to go. They can buy a lot of Greek, Portugese, Spanish, and Irish bonds with that. They cannot buy a lot of Italian debt with it. Good-bye.
Okay. Let me see if I got this right. Bear with me now!
The ECB uses EU bonds it has purchased, with freashly minted Euros, from member countries as collateral. To issue new ECB bonds that it "lends" to the IMF so that the IMF may "lend" more money to EU countries who are insolvent, who sell more bonds back to the ECB so they can pretend that they are solvent?
I'm going back to bed. My head hurts!
Good job sorting this all out, although your inappropriate use of a period threw me and messed up the meaning.
Keep your eye on the pea no matter how many times they shuffle the shells.
20 bill./wk is more than enough to buy all new issues of PIIGS + F public debt:
PIIGS + F public debt = 5 Trill.
ave. maturity = 7 years = 364 weeks
ave. weekly issuance of PIIGS+F debt = 13.6 bill.
as a matter of fact, they don't even need to purhcase any of that in order to maintain PIIGS + F sov. bonds rates capped : just send a credible signal that they stand ready to purchase those quantities if rates go above the cap. Signal they are sending now...
So that's 1040 billion next year, eh?
I think someone just rang the bell. Did you hear it?
Risk is so ON!
They meet every 2 weeks to make new decisions.
Sure, this 20 billion weekly cap is the end of the monetization scheme /sarcasm
'We give the machines 15 minutes before they comprehend the significance of this news.'
It means we're in for a Merry Christmas this year doesn't it?
yep, sanity clause has some oil revs to recycle into EU debt.
There is also the unwritten cap at 7% yield for Italy 10Y
Might take 20-30 minutes for the machines to realize the significance of the story, Tyler. Some seriously dumb ass commodity traders are currently enjoying the joy joy, old rumor, complete farce bullshit bounce this morning, being bailed out on their momentum stupidity from yesterday again [and again and again]. Let's call it 25 minutes....mark...
capitalism is long gone
And it is time for us to exert moral hazard on those who perpetrated that policy.
Moral Hazard?
I prefer to exert some Iron Maiden. Those poky things hurt more.
Don't look now, but oil is back over $100, that's bullish for discretionary spending.
People doin' a lot of driving today so... there's your causality.
Price of Molotov Cocktails is going through the roof.
THESE ARE THE NEO NAZIS (JENS WEIDMANN, JUERGEN STARK, YVES MERSCH, NETHERLANDS AND AUSTRIA) THAT THEY ARE DESTROYING THE EURO AREA AND CAN ULTIMATELY DESTROY THE ENTIRE WORLD...GET RID OF ALL THESE SUCKERS...
ey, is that you bunga. you want my money bitch?
Time to inject a Bird Flu variant into the population.
I was kinda partial to SARS
20Bx52W=1T QE3 via Eurozone.
benny/oblama buying spoo with money out of thin air but no worries they'll inflate those digits away, in fact one day after it's discovered what they did the U.S. will have made money on those trades.. half way to Weimar but still.. they are our future heros guys be nice.
Sounds like a target more than a limit.
80 billion a month?
brilliant. good one.
http://www.bbc.co.uk/news/business-15748696
Wait a sec, the UK and US owe nothing to one another? You don't say.
Would you fuck me for $1,000,000?
Yes.
How about $100
What do you think I am? A Whore?
We've already decided what you are, now we're negotiating the price!
The stupid dog stock market (futures traders) chases every offer to celebrate Spanish 10-year yields (currently 6.8%) spiking above Italian yields (currently 6.6%)
Europe is fixed again!
well it is Spain's turn to install a technocrat after all... need to exert a little pressure.
A lot of bulls were positioned for a breakout and Santa Clause rally (~80% of the trading community).
Now they are in the trap and desperate for any rumor/news to bail them out.
I saw some hedge fund manager on one of the channels with a recommendation to "play the Santa Claus rally by the book"
Umm, ok.
Why that's only 2.9 billion euros a day.
A monetization bargain!
The IMF is setting itself up to be the one world's Federal Reserve ... I wonder if everyone has figured this out by now.
they need a purpose. they lost their original one with the end of bretton-woods. Nearly 40 years of preparing a world government, and now the time has come.
Wow, hadn't thought of that until Steve Liesman blurted it out awhile ago..... Next Stevie will come to the conclusion that the Fed may have to print if there is further decline in confidence....
Scintillating....
Eurozone debt web: Who owes what to whom ?
http://www.bbc.co.uk/news/business-15748696
Debt is debt ... even if it's Circular !
Net all the Debt, and the Bankster & Politicians are out of business !
.. which is why we have so much !
its not the debt--its the interest!
Sounds like a bad "Frankfurter"
Who the fuck gave them this mandate, also national governments broke all laws that we now backstop other countries debts. Who the fuck they think they are. This is unbelievable. Germans please vote Merkel down asap and go to DEM, so we can all live with our own national currencies.
It took the Soviet Union 70 years to collapse. The Euroland Union woun't take that long:)
I will guess everyone in Europe is scrambling to change their bond auctions to Mondays.
ecb is going to force the screw job away from them and on to the usa. we are fucked.
€1 trillion of printing per year. This is the end of Eurozone as Germany will leave.
The only way for Eurozone to stay intact is 0 monetization and 50-70% default across the board.
This will send the markets up 4 or 5 percent today, Im big time short..... I am big time F'ed............... A trillion a year solves all of the EU....... Print on Bitchez......... Germany is TOAST.........
my mind is blown by the stunning power of your intellect. Truly Sir, you are a master of reverse psychology. Because you proclaimed that you are big time short, I find your assessment that the market is going to go up 4 or 5% today completely credible. I will therefore cover all my shorts at the open and go all in on a 3x SPY long....
i think the machines have mangled this, already (paste):
This Thursday, the Governing Council met and also negotiated a further reduction. The result of the vote was at the editorial close unofficially not to bring in experience. A spokeswoman for the ECB would not comment on the matter. The bond purchase program was launched in May 2010, initially in favor of Greece.
i think this is just ongoing stuff
and, it may not even be accurate reporting, here, since the ECB will not issue a statement
this is much more risk-Offy than the IMF bailout scheme, too!
Full press release about meeting can be found here:
http://europa.eu/rapid/pressReleasesAction.do?reference=IP/11/1360&forma...
Wasn't the most ECB ever bought about EUR19B one week in August.
Further isn't this telling the banks that they can ONLY unload their exposure to Italy and Spain to the tune of EUR20B a week.
I fail to see how this is EURUSD bullish, or for stocks either. It spells LESS intervention than what market would probably have wanted. Bizarro markets!
So how long before the Fed starts buying eurotrash bonds as a proxy for the ECB then?
The Fed will exhaust its reserves of euros then modify the upper limit on the euro swap line (remove it), pull a whole lot of euros from the ECB and go on a buying spree. The swap will then be unwound as the ECB exchanges said eurotrash debt for its burgeoning USD account with the Fed, the whole process bypassing forex markets and preventing the euro from collapsing as it should.
I bet the central banks love that idea. They'll try it before they let the euro project die.
Only Germany can stop it, but stopping it means Germany has to shoot its own exporters in the head. My bet is that Germany eventually caves in and lets the ECB start unlimited OMO on condition that current account surplus nations be in the drivers seat (Netherlands, Germany, etc). The euro will weaken but that's not such a bad thing for Germany. No other choice really.
Spot on! If you can't get your third reich with bullets, why not try money?
Only Germany "caves in" after an appropriate time of opposition, just to maintain appearances. "There is nothing quite so vulgar as to make a demand for truth in polite society."
(A. Pike says "If I can't expand slavery with arms, I'll use the Federal Reserve!")
Warfare evolved, where soldiers wear ties and wield economics or law degrees.
YEEESS turn IMF into a bad bank! everyone wins! (sarc)
Sorry to belabor the point, but while this may limit direct OMO by the ECB, it doesn't cap indirect OMO by the ECB in the form of accepting eurotrash debt as AAA collateral (when it's actually junk) on loans made to the very same PIIGS (in violation of Basel II).
Using that as a regulatory dodge, the ECB has already handed out in excess of 300 billion euros. It shows up in TARGET2 imbalances between eurozone members.
Furthermore, I remind people that the ECB is not the only printer of euros in Europe. Each national central bank is permitted to print on condition that it simply notifies the ECB and that is exactly what has been going on yet, somehow, the euro exchange rate does not reflect it. Quoting Hans-Werner Sinn:
Europeans are masters of political intrigue. While the meth-head CNBC crowd with an attention span of 5 seconds demand an immediate explosion in Europe, in reality we're likely to see "Waiting for Godot". An endless stream of apocalyptic headlines that stretches out for years on end as eurocrats slink about in the shadows embedding a few knives in the right places. Eventually the world will grow bored of it and stop paying attention and anyone left alive from WWII will wonder what in the fuck they bothered fighting for.
LMAO! Talk about challenging the bond traders who smell blood in the water.
Now the traders know exactly how far they need to go before they can reap massive rewards as yields spike.
Not very bright them eurofanatics - and thank God for that!
I wonder how many favorable accounting "errors" will be found during the next 6 months.
20B Euros/week is still over 1T a year, a hefty sum even by NYFed standards. Not enough, but maybe enough coupled with an energetic rumor mill to keep the rickety Eurozone structure standing.
Strangely, it seems that it is almost exactly the amount that the Fed did in QE2 unless I am mistaken. So Bernankenstein has a chat with Draghi et al and said "Hey, we did $600B USD in 6 months and our stock market flew higher. BTFD was the rule of the day. People made cute movies with those funny bears about it. It becomes a cultural thing." Not wanting to stray from the beaten path the response is, well just do what they did. Problem is that that will be EUR bearish, just as QE2 was USD bearish. And since OUR stock indices are highly correlated to EUR, it would be bearish stocks? Will it matter that yields are supported in Europe? Will they be supported? Are people that stupid? The Germans are ultimately right. Printing relieves the pressure for reform, so it only allows the problem to grow over time.
was almost out of the three ply Lehman's I picked up at a fire sale a couple of years back. I'll need something with the extra comfort a discerning gentleman like myself requires soonChristian Louboutin Heels Alexander Wang Shoes Christian Louboutin Sale Discount Christian Louboutin Shoes Womens UGG Boots
Alexander Wang Bag | Alexander Wang Shoes | Alexander Wang Rocco Alexander Wang Frankie Creeper Short crude oil. The world is swiming in oil as everything else. Its elevated price is just a scam. The probability of war is zero. Uncle Sam can´t go to war against Iran because both its flanks are insecure. The left flank goes to the Straits of Hormuz and if that is closed this means crude price $300 and Stalingrad for US forces in Iraq and other US vassal states in the gulf. As for the right flank that supply line goes through Pakistan. It´s shaky enough as it is.