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ECB Buying Saves Europe From Cliff's Edge For Now
The moment BTPs broke above 500bps over Bunds this morning, it was clear that the ECB was in buying (and confirmed by desk chatter). Early in the day, European corporate, financial, and sovereign credit markets were in quite positive territory with the former at highs of the year. As downgrade rumors broke, and then were exacerbated by the increasing realization that Greek PSI is not going to happen, sovereigns broke wider rapidly and corporates and financials fell off a cliff (their biggest drop of the year so far) with XOver (the European high-yield credit index) widening 30bps almost instantly. EURUSD took out recent lows trading back to 1.2624, its lowest since August 2010 and EFSF (the much-heralded firewall) widened 9bps off its tights. The last hour or so of trading was dominated by improvements in BTPs and OATs as the SMP went to work and this provided some relief across all assets leaving European stocks at day's highs and modestly lower (after nearing the lows of the year so far earlier), non-sovereign credit marginally wider but sovereigns (Belgium, Spain, and Austria worst) still decently wider. While the impact of the downgrades on EFSF's structure and Germany's willingness to shoulder even more implicit guarantees is critical, we wonder if the PSI talks breakdown is the more important driver as investors face yet another a-ha moment and just as when the USA was downgraded, that the impossible may actually be possible (disorderly Greek default). In the US, ES (the e-mini S&P 500 futures contract) has also rallied nicely off the earlier lows but is holding at VWAP (and is in line with broad risk drivers for now).
European stocks (blue) are underperforming credit now but the steep covering into the close saved the day from being a total disaster. XOver's squeeze tighter (higher in the chart) was painful but gapped wider today as downgrades and PSI talk hit.
The USD (DXY) pulled back to its highs of earlier in the week (as EUR pulled off of 16 month lows to end the European trading week -0.24% (not exactly terrible) but most notably 1.5% weaker than its earlier highs this morning. This is a rapid rise for a major that has such high short-interest and suggests the argument for a squeeze is indeed being dominated by unlevered real money exiting. SEK's move to biggest loser was also notable.
BTP buying saved the day as the ECB was clearly in action. Most sovs were wider and EFSF ended over 9bps wider from its tights.
Charts: Bloomberg
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Another stick save. But who saved the ECB? Benzebub?
I hope they have a lot of room on that credit card, because they are going to need it.
http://silverliberationarmy.blogspot.com/
The Magical Money Press. No crisis.
The ECB Ponzi to the rescue, again..
ECB cock-blocks Greece default.
SPX is back to AUDJPY as the indicator. QE3 trade is on!
Before the rumors of downgrade there was a major headline from CNBC
"
"
In red, i had a tought that something is brewing.
DOUBTS about 'the recovery'? How can that be? The economy has already been confirmed totaly recovered by all top governmental economists! What dirtbag is out there doubting the recovery is not indeed splendid??
Lemme at 'em!!
But Dimon himself described a "continuing recovery" only today when JPM released its results.
With the French AAA in tatters the ESFS form of ponzi bonds are going to be impossible to sell.
I have an image of a petulant and enraged Sarkozy face down on his office floor chewing the leg
of a Loius XIV chair & screaming obscenities at his flunkies. His re election campaign just got a
whole lot tougher, Shame.
will they buy after 3 pm?
I guess that's when official statment comes.
I remember when US got downgrade, market did not react to violently till monday and than.....
hahahahahahaha!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Central banks sopping up all nations debt, which was CAUSED by the central banksters in the first place, and people STILL wonder whats coming next? Review history!
SheepDog...I can think of a lot of things coming next...Wrong timing for a deflatonary bust so I suppose more QE and more cowbell!!!
Theyre going to totaly 'MF Global' EVERYONE one of these mornings, position accordingly.
That was not one of them but woulden't be 'out of this world'...If that does happen and brokerage acounts etc. get the 'MF Global'...Safe to say that will be 'The End of the Beginning'
That was not one of 'them', who?
'Wrong timing'....why? When is the 'right time' to collapse a nation? Spring?
These F**KWADS will put it off for as long as possible...Doesn't feel right! Speaking strategically, I suppose winter would be the best time...Less mobility and all that...
Oh I see, 'next winter', but definitely not this winter. COuld all unravel Monday morning for all we know....most important thing is to position accordingly now.
My prediction: ECB will print another 2 trillion by year end.
$2 trillion? Why such an insignificant tiny amount as that?
ECB, (and perhaps the Fed?), are about to sustain the start of a wave of capital losses on its balance sheet. Will they have to answer for them and if so, in how many ways?
FOX news business correspondent, Charles Payne, slamming Bernanke. Says he's arrogant, misleading, and an idiot for thinking he can orchestrate the entire economy in his prolonged crises while telling people things are OK. Payne has always been pretty plain spoken.
I say Bernanke is going to be another economic Joran Van der Sloot. Everybody will suddenly wake up one day and and find all of their assets gone without a trace and he won't be talking. Jon Corzine and Bernie Madoff are two other sociopaths that already fit the bill.
Right, just when everyone is lulled into comfortable slumber that The Bernank will always be there to bail them and their 'equities' out no matter what, theyll wake up one morning and stare at a -0- on their trading account...'The Big MF Global' coming to a morning near us soon.
'how to fade the EU's slo-mo cliff-hanging train wreck' [by tyler durden]
Those S&P rumours / actual downgrade (?) come in handy every time the Euro tries to break out to the upside and drag the rest of the risk armada with it. But one can only manufacture news for so long. It's ever more expensive, as curves steepen, to be short, and now you have the LTRO cash chasing everything in sight... Very few offers in credit today despite the downgrade, which, pardon me, doesn't matter for one yota. Wonder from whom are all the shorts going to buy back. No surprise everyone is trying to hold down the market, by any means. Prepare for the squeeze.
Excellent article!
fixed the headline for you....
Good day to pick up physical metals while the bankers still think that any paper is strong today. The global currency crash continues.
You'd think all this central bank intervention is QE already... but it's all a bunch of worthless bulllshit. We're in a global depression-- all this money used to prop up an insolvent financial system and broken market aint for free.
Excellent point by Tyler. Look at the Euro sov yields over the past month. EVEN GREECE FELL 160bps!!!!!!!!!!!
http://confoundedinterest.wordpress.com/2012/01/13/has-the-ecbfed-bailout-of-the-eurozone-helped-yes-short-run-no-long-run/
But unless there is real budget reform, it is just stalling.