ECB Fails To Sterilize Bond Purchases, €9 Billion Shortfall Confirms Euro Bank Liquidity Freeze

Tyler Durden's picture

Those wondering what caused the accelerated reacquaintance of the EURUSD with gravity on its way to what UBS has just dubbed the "beginning of the end" (report to be published shortly), need look no further than the ECB where the ECB had its first failed sterilization since the expansion to monetize Italian and Spanish bonds was launched in August. As noted yesterday, the ECB had to sterilize €203.5 billion in cumulative bond purchases. Instead, it only got bids for €194.2 billion from a paltry 85 bidders. This means that for the first time, as shown on the chart below, the ratio of Bids to Bonds for Sterilization fell under 1. What is much worse, is that this happened on the day of the weekly 7-day MRO, during which a total of 192 banks took a combined €265.5 billion from the ECB's weekly 1.25% handout. The amount tops the 247 billion that 178 banks took last week and is the second week running that demand hit a new two-year high. In other words, despite demanding the most amount of money in 2 years, the banks were unable to flip all that cash and "sterilize" monetized paper. This is very bad news as it confirms that the SMP program is coming to a forceful close as banks withdraw in their shells and any further PIIGS bonds purchases will be no longer sterilized above some threshold level, somewhere in the high €100's, low €200 Bns. Whether this is the final straw that pushes the ECB to print outright remains to be seen: it is surely providing the needed dead cat bounce to the EURUSD as hopes that Draghi will finally do as the banks demand have once again resurfaced.

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spankfish's picture

Sell sell sell!  How can we reloot unless we sell this shit!

ArkansasAngie's picture

And this is good news?

The markets are green?

My Mama didn't raise no fool.

Captain Kink's picture

Beginning of the End?  That was the day they formed the EU.

Sunset chaser's picture

I'd bet at the end of this deleveraging cycle that is just beginning, someone proposes that we go to a global currency. Hopefully enough people will remember the euro to stop that power grab ploy.

cossack55's picture

Maybe Rudolf von Bernankenstein can show him where the print key is on the keyboard.

GerritB's picture

Is it time yet to withdraw my money from Dutch banks?

Sunset chaser's picture

With all the noise a lot of people are losing sight of the simple fact that many of these countries have already passed the point of no return, by which I mean investors can no longer be confident that they can afford to pay the interest on the debts they already have.

Any mechanism, including printing more money, that does not address this issue will not fix the problem, and it will only get worse.

In reality, the only good solution is the admittedly horrible option of default and debt forgiveness. Getting rid of the banks and putting the sociopaths in jail would be a positive outcome.

Dick11's picture

I have traded all of my fiat for other nice marbels. Don't trust any bank, even the Dutchbanks.

Only the householdrunningaccount is still working.

Keep on stacking!

MFL8240's picture

The Casino is opening soon.  This news along with AMR filing for bankruptsy should move the market up another 100 points. lol!

Curtis LeMay's picture

Funny that you mention AMR.

I just pulled together enough dough to buy 10K shares of AMR for myself.

This is a short to medium term buy in, but AMR is probably the best full service run airline in the US and they have over 4 billion cash on hand.

They are just going to restructure their union contracts, and the fact that they held out for a decade after 9/11 before declaring 11 - while every other major carrier here did so long ago - just underlines AMR's strengths. They also have new and highly cost effective Boeing's and Airbust's coming online in late 2012/early 2013...

Seeing AMR at $15 in a year/18 months is a very reasonable expectation, imnsho.

chubbar's picture

Let me guess, you are the CEO of AMR? That was one of the best PR pieces I've seen here, you should make that into a commercial.

Curtis LeMay's picture

LOL, nope. Former commercial pilot, retired from the field, with chitloads of friends in the industry...

I am glad I waited. Now I can get 10k shares for $2300! 

Who thinks American Airlines stock is not going to go up from 23 cents a share, eh?

StychoKiller's picture

Good luck!  Airlines have at least three strikes against them:

1. Dependency on fuel.

2. Unionized workers.

3. Govt regulation, both hidden, and in yer face (and underwear!) via the TSA!

I refuse to fly unless I absolutely have no other way of getting somewhere.

tim73's picture

USA/UK don't even bother, just printing like mad twins in the attic. QE! QE! QE WILL SAVE US! 

jcaz's picture

Wow- they found 85 bidders for this shit?   Biggest surprise in this story.....

max2205's picture

But Ben gave them the mula. Huh? Don't they know pd buys and flips to ECB for slightly higher price as a secondary market trade

Arie L Ultra's picture

Could it be a ad hoc treaty change by Draghi to test Germany.

El Oregonian's picture

Squid meet frying pan.

lunaticfringe's picture

I'm not sure what any of this means. How do I get in?

Mike2756's picture

Yen having a tough time, no more flight to safety?

thunderchief's picture

Can we please stop with the up or down arrow ratings.

I think they are gay, and stop people from making their own judgments.

If you are a racists, psychopath, ignoramous, pedofile, homophobe, patriot, anarchist, moron, or genius, or all the above, you are not going to find this in Tylers stupid arrow ratings...Its just dumb.

Someone please send this message to the Oracle.


If there is one up arrow it is from Me..


StychoKiller's picture

You can always tap out or go limp...

fonzanoon's picture

This is officially boring. Greece somehow keeps surviving another day. They made the biggest f'n deal about Italy's yields. The yields are now almost 8%. Italy keeps surviving another day. The market see saws but it certainly has not collapsed. This will go on and on.

fonzanoon's picture

This is officially boring. Greece somehow keeps surviving another day. They made the biggest f'n deal about Italy's yields. The yields are now almost 8%. Italy keeps surviving another day. The market see saws but it certainly has not collapsed. This will go on and on.

StychoKiller's picture

Oh well, no need to repeat inane comments -- Bored?  Take up sky-diving.

semperfi's picture

Its the Beginning of a New Era of Prosperity for the Global Bankster Syndicate - they never lose - they will never lose - and the reason they will never lose is because they have all the sovereigns over a barrel and can therefore get the rules changed post-haste to A) keep the Ruling Class of the sovereigns in control and B) thereby maintain their ultimate control over everything on the planet.  Sorry to disappoint you all but there will be no Eurogeddon, there will be no collapse.  There is only going to be a very slow decline of the global Proletariat into serfdom.  Back the Middle Ages sucka!

jabaykhan's picture

this is definitely bullish!

youngandhealthy's picture


Its not "new". It has happened before. Summer of 2010



Hansel's picture

We really can stop pretending all those bond purchases are sterilized!  No more just thinking it was all bullshit.

ThirdCoastSurfer's picture

Print, print, print. A rising tide floats all boats that have ballast and pitch!

StychoKiller's picture

Hmm, the Banksters are busy pulling corks from one hole in the hull to plug another -- Musical Holes!  A new party game!

GreetingsFromGermany's picture

As Welt-Online reports in Germany, Economis Carl Weinberg (High Frequency Economics) supposes a change of course of the EZB. The central bank did offer just 0,62% interest - much too less to suck off liquidity from the market. This might have been a strategical step from Draghi to ignore German objections in order to create "facts".

Holger Schmieding, Chief-Economist of Berenberg Bank explained, that Jens Weidmann, chief of the Bundesbank, should deliver a televised address to explain the numerous German savers the serious situation here in Europa - in order too suppress peoples indignation...

Watch source: Welt-Online (