ECB To Fund Eurozone Central Banks As PSI Sweetener

Tyler Durden's picture


A number of headlines from Bloomberg, via Die Welt, that the ECB will undergo a bond swap with the NCBs on their greek government bonds and the 'profit' will flow to governments.


This is absolute delusion. The ECB (via the NCBs) claims EUR50bn nominal value of GGBs - so likely took a EUR20-30bn loss on this given the prices they bought at under the SMP and the current market price. We explained last week (must-read) the delusional nature of these profits (that will disappear immediatley the new bonds break) and assume this is yet another attempt to make market participants believe they wil help with PSI. However, there is more to this in our humble opinion. Since the ECB says they will distribute profits (which we know are illusory) to governments - it is nothing but a covert attempt to funnel money (think printing) to local government central banks (accept 20c bonds and offer 100c bonds) - and the illusory profits here are simply giving away free money to the NCBs. Perhaps the loud screaming over the pain associated with even an 'orderly' Greek default is enough that the ECB needs to placate them with some new freshly printed money? For now, the PSI remains in limbo for the hold-out blocking-stake reasons we have discussed at length - if the ECB were to step into the market and buy/swap with hold-outs all of their UK-law bonds at Par (for huge gains to the hedgies) then perhaps we get a deal done - but this would be astounding and leave the rest of the European sovereign debt market disabled as investors pushed for the same deal and vigilantes drove Portugal and then Spain to this point...

Please explain how a notional swap in any helps the Greeks? (no debt reduction)

No surprise we see this -


Finally, and as before, we issue a formal question to Mr. Draghi to point out just where on the chart below does the ECB book profits on Greek bonds?


And some overnight insight that we tend to agree wth from Credit Suisse:

We remain very cautious about the long-term sustainability of the debt after restructuring, and it is just possible (not our core case) that the troika takes the rational decision that it is cheaper to let Greece default and reimburse the ECB for its approx. €30bn of GGB losses than to pay the rising but nominally €130bn. Yet it was only on 14 February (two days before writing) that the ECB was confidently talking of distributing its GGB profits, so we are cautious about second-guessing the analytical framework being used.

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Thu, 02/16/2012 - 12:56 | 2166164 transaccountin
transaccountin's picture

Fresh hopioum. AHHHH it feels good!

Thu, 02/16/2012 - 13:11 | 2166234 slaughterer
slaughterer's picture

There are lies

Then there are desperate lies.

Then there are "Greek deal" lies.  

I have learned this now.  

Thu, 02/16/2012 - 13:15 | 2166251 fonzannoon
fonzannoon's picture

There are high frequency trading monkeys running around buying on every announcement.

Thu, 02/16/2012 - 13:31 | 2166314 JW n FL
Thu, 02/16/2012 - 22:08 | 2168052 Buck Johnson
Buck Johnson's picture

Soon the lies will run out and one morning we will find out that Greece has defaulted.

Thu, 02/16/2012 - 12:56 | 2166166 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Europonzi at the disco!  Dance dance party!  Everybody party!

Fri, 02/17/2012 - 00:40 | 2168490 StychoKiller
Thu, 02/16/2012 - 12:57 | 2166167 TradingJoe
TradingJoe's picture

AND ALL OF THIS AHEAD OF MONDAY!!!! When we are closed!!!

Thu, 02/16/2012 - 13:17 | 2166262 T-roll
T-roll's picture

I don't think it's a coincidence that the decision will be made on a day when US markets will be closed.  Tuesday will be interesting.  I guess the market will either take-off like a rocket or tank based on what happens Monday.  I guess it will depend on if Germany decides to tell Greece to screw itself or not.

Thu, 02/16/2012 - 13:22 | 2166276 TradingJoe
TradingJoe's picture

I agree, maybe this why today was the day to announce the big swap :))!

Thu, 02/16/2012 - 13:28 | 2166301 SheepDog-One
SheepDog-One's picture

What are markets closed on Monday for, Whitney Houston Day?

Thu, 02/16/2012 - 12:57 | 2166172 Silver Bug
Silver Bug's picture

Central bankers creating more black holes of debt.

Thu, 02/16/2012 - 12:57 | 2166174 slaughterer
slaughterer's picture

Very creative rumor.    For all the right reasons, ZH shoots its down.  

Thu, 02/16/2012 - 12:59 | 2166177 SmoothCoolSmoke
SmoothCoolSmoke's picture

Bernanke, "SCOREBOARD."

Thu, 02/16/2012 - 12:59 | 2166178 ZeroPower
ZeroPower's picture



Thu, 02/16/2012 - 13:06 | 2166213 SheepDog-One
SheepDog-One's picture

We used to assign the unexplainable as 'PFM', pure fukin MAGIC!

Thu, 02/16/2012 - 14:02 | 2166423 AgShaman
AgShaman's picture

PSI = Pounds per Square Insurrection

Govts and Central Bankers love to add excess hairspray to the potato gun....then look around in astonishment when they blow a hole in the neighbor's garage

Thu, 02/16/2012 - 15:28 | 2166655 BlackholeDivestment
BlackholeDivestment's picture

                                                      LMAO SheepDogOne.

.....PFM...... is explained though. Our generation is declairing  ..........................................................the fall of Chairsatan's Black Hole Babylon ..........................................................................and the drunken market Whore ...............................................................................riding ''The''Bullshit Bullish Beast'' ...................................................................with the Black Horse scale Cup of Fornication ....................................................................................filled with the Wine of Wrath.

It's PFM fer sure Shep, but, it's also the revelation of the ''prophetic strong delusion'' .............................................................................of the Suicide Vampire Squid ...........................................................................of the Great Wal Mart of China ...........(AKA ''SD'' Street Devil or PF2AM3 ''pure fuckin fallen angel money market magic'') .................................................^ ^...........................................................

              Angel in the Whirlwind^^   ]0[    ^^Money  Printing 

                                                  V  V





Thu, 02/16/2012 - 13:08 | 2166224 GeneMarchbanks
GeneMarchbanks's picture

That's elementary:

1.Create Swaps

2.Swap them



Thu, 02/16/2012 - 13:41 | 2166353 unrulian
unrulian's picture

i'm not that bright...

so.... if i pay off one credit card with another one at a lower rate the difference in rates is actually profit?


Thu, 02/16/2012 - 13:14 | 2166239 CrashisOptimistic
CrashisOptimistic's picture

2011 Lesson #1:


They will kill people. (Gadaffi)  They will jail them until they resign and then release them. (DSK).  They will force people to lend money to other people they don't want to lend to (PSI).  They will redefine words.  They will redefine accounting.  They will do anything.

In the end, there is only one thing they cannot do.  When it becomes clear, it will all unravel, but not until then.  They will declare absurd things to be true by edict until they reach that one unfixable limit.

That limit is oil.  There is nothing else they can not do.  They will try to fake oil, too, with the SPR, but in the end only oil is beyond their power.

Thu, 02/16/2012 - 12:59 | 2166181 vote_libertaria...
vote_libertarian_party's picture

Well that explains todays stock spike higher...everything is FIXED...again!!!


'Nobody has losses' fantasy world is a lovely place.

Thu, 02/16/2012 - 12:59 | 2166182 mktsrmanipulated
mktsrmanipulated's picture

well this should fix everything wtf are they gonna do about neg does the swap do NOTHING

Thu, 02/16/2012 - 14:04 | 2166441 Vince Clortho
Vince Clortho's picture

with words.


Have to respect that everything can be fixed with words.

Thu, 02/16/2012 - 12:59 | 2166183 Yen Cross
Yen Cross's picture

 BTFD is in vogue I see. I'm long Monet and Picasso./sarc

Thu, 02/16/2012 - 13:00 | 2166186 mktsrmanipulated
mktsrmanipulated's picture

these fuckers should be charged with mkt manipulation...fucking joke

Thu, 02/16/2012 - 13:07 | 2166211 alien-IQ
alien-IQ's picture

instead of charging them with market manipulation, a crime that will surely land them a stiff 5 digit fine (puke).

how about if we just made them walk the streets of Athens without a bodyguard and carrying a sign that identifies who they are. I think that might better achieve the type of justice they deserve.

Thu, 02/16/2012 - 13:44 | 2166365 unrulian
unrulian's picture

the greek pansies would through tomatoes at them....drop them off in kabul with a plackard that says.... i love jesus

Thu, 02/16/2012 - 13:01 | 2166187 lizzy36
lizzy36's picture

Desperate times. Desperate lies. Desperate.

I have a buddy who says the best structured products he creates are when he has a motivated seller (cough desperate) meeting a motivated buyer. 

The longer gravity is ignored, the more desperate all sides get. 

Thu, 02/16/2012 - 13:20 | 2166272 Manthong
Manthong's picture

Geobbels didn’t even have the gonads to try a lie this big

Thu, 02/16/2012 - 13:03 | 2166188 alien-IQ
alien-IQ's picture

Oil at 103, dollar falling off the cliff, EUR/USD going completely parabolic. /ES vertical since 8am

you just gotta laugh.

Thu, 02/16/2012 - 13:03 | 2166194 mktsrmanipulated
mktsrmanipulated's picture

wait till psi says fu to the paulson on cnbc yesterday quoting how jamie dimon says us banks are immune to a greek default...-----hey jamie thats only if you cds gets elected

Thu, 02/16/2012 - 13:03 | 2166196 firstdivision
firstdivision's picture

So the Euro goes up vertically due to the ECB will have to print.  Sure, that makes perfect sense.

Thu, 02/16/2012 - 17:44 | 2167332 mark mchugh
mark mchugh's picture

Well, yeah....What does diluting the hell out of your currency have to do with stealing from Forex traders?

Thu, 02/16/2012 - 13:03 | 2166197 Roland99
Roland99's picture

ooo...that big shiny Print button looks too good to not press!

Fri, 02/17/2012 - 00:47 | 2168513 StychoKiller
Fri, 02/17/2012 - 09:39 | 2169065 Roland99
Roland99's picture

that's exactly the button I had in mind!


Thu, 02/16/2012 - 13:04 | 2166202 falak pema
falak pema's picture

For those who predict that a Grek default is planned for March 23 here is an interesting twist about CDS mega bomb payout on OTC transactions in US banking, as in Euro banking :

ART CASHIN: Forget Greece, Traders Are Worried About Something That Could Send Us Back To The Middle Ages Sam Ro | 2 hours ago

Read more:


So, Europe goes under into deep recession, and...WS swims into what...??? 

I love those who sit on the Titanic and drill holes into its hull, all in the name of Euro shenanigans, forgetting there are shenanigans in Big Apple and Big City that would make even Abacus blush in pristine innocence. 

I want my money back...Is the cry of the CDS market if its deemed voluntary in Greece, and that will freeze derivatives like the ice age of banking world wide. Drill away at the hull of WS Titanic, its gotta to be thick pray the banksta cabal, as Costa Concordia of Greece goes to maximum tilt. 

Thu, 02/16/2012 - 13:10 | 2166233 Tyler Durden
Tyler Durden's picture

Both the CDS triggering, which was news in July 2011, and the Debka-esque story are completely irrelevant. The only things that matter are i) insurance company impairments and ii) Greek bonds repoed to various central banks via Shadow banking. ii) is the only thing today's action is trying to address. As for i), pray that suspension of MTM works through bankruptcy.

Thu, 02/16/2012 - 13:40 | 2166351 falak pema
falak pema's picture

TD : you will make a catholic out of me, on my knees singing " I pray God, that suspension of MTM works through bankruptcy"... its Greek to me, HOW marking to market will work miracles and go through the bankruptcy wall  but I'll try and educate myself. I have a sinking feeling that this "mark" will greatly "unmark" my own personal account like melting butter. 

As for insurance company impairments, or insolvency,  I'll tell them to not impair by going soluble, disappearing into acidified solution, but go to inert like gold that doesn't dissolve! Its all like money bet on roulette wheel, the accounting in this world, marking to market and disappearing like salt in hot water; where red beats black, as odd beats even, until that run of luck kicks the acid bucket...and all disappears! 

I remember that from "Casino" and SS/DeN and even "the Great Sinner"...great film with Ava Gardner and GP. It makes casino royale and empty pockets  after blow out, more palatable, and the acidity less corrosive. I'll have my glass of Muscat to forget all that! Of course, on my knees and without my hat on! 

Thu, 02/16/2012 - 15:05 | 2166580 slewie the pi-rat
slewie the pi-rat's picture

i'm pretty sure this won't be newz to you:  traditionally, BK liquidation is only done @ market

otherwize, like GM, it would just be another rectalRefi to those with contractual claims whose wealth is needed by others for the "greater good".  listen to the music?

when the furniture is sold to the highest cash bidder, the gavel falls on everyone alike = BKmarket

how much longer the books will reflect that the used furniture is "worth" 100X what the "market" might say is just a matter of how long the ponzi-stone continues to produce blood, as far as i can see

how long will it be "worth it" to bear the "social consequences and long-term costs" of pretending the growing zombie population will be solvent sum day?  

and what will happen then, in the "market"?  what shall people see as the "greatest good" on that blessed morn?

this is the opera we're all watching, and we're pretty much all in, together, thanks to the fuking commie pols and fascist banksters and thePeople who get the treacle-down, too, we might all admit...

that matket "sigma-signal" may be first displayed in greece, but as SD-1 sez, we'll deal w/ the can when we catch up to it, again, this afternoon or tomorrow at the latest; just a little kick aaaaand...we're all set till "tomorrow"

tyler has polished off the entire year's communion wine and is in the pulpit, BiCheZ!   

Thu, 02/16/2012 - 13:05 | 2166208 mckee
mckee's picture

Buy high sell low... make it up in volume.

Thu, 02/16/2012 - 13:11 | 2166235 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Make what up on volume?  They are booking losses!

Thu, 02/16/2012 - 14:07 | 2166461 mckee
mckee's picture

Losses? That'd almost be like buying high and selling low!

Thu, 02/16/2012 - 14:08 | 2166463 mckee
mckee's picture

Losses? That'd almost be like buying high and selling low!

Thu, 02/16/2012 - 13:05 | 2166209 mckee
mckee's picture

Buy high sell low... make it up in volume.

Thu, 02/16/2012 - 13:07 | 2166215 resurger
resurger's picture

i read an article today that ISDA (International Swaps & Derivatives Association) controls the CDS Market and the "Credit Default" event's which caused MF Global to go bankrupt.

In my perspective i think three of them (JP, MF and ISDA) wanted this to happed.. a CDS Market worth 32 Trillion USD's

So how do you expect Greece to default exactly?



Thu, 02/16/2012 - 13:18 | 2166261 GeneMarchbanks
GeneMarchbanks's picture

'So how do you expect Greece to default exactly?'

I don't by the simple fact that it already did. Ask yourself a simple question: If I figure out a way to keep circulating blood through a corpse, is it still dead? Simple. The only people left questioning this default are the ones who excepted Clinton's remark about the is-ness of something and the banking cabal. Both are semi-retarded.

Thu, 02/16/2012 - 13:25 | 2166292 resurger
resurger's picture

There is no question about that Gene, but see the TBTF will go fucking Bankrupt and the 0.00001% will not allow that shit to happen!

Imagine triggering CDS's worth 32,000,000,000,000 USD how the fuck can they afford that shit?! maybe half of those CDS's are naked.

after all Fuck TPTB, but we have to wait what time brings


Thu, 02/16/2012 - 13:31 | 2166310 GeneMarchbanks
GeneMarchbanks's picture

Sovereign CDS will trigger the end. The Atonement Cometh, naked CDS or not.

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