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ECB Purchases €22 Billion Of Italian, Spanish Bonds In Past Week, Highest Weekly Amount Ever

Tyler Durden's picture




 

The ECB just disclosed its much anticipated weekly purchases under the SMP (or direct monetization) program, which at €22 billion came well above expectations of €15 billion, and represents the biggest weekly total in the 66 weeks of purchases under the program, more than the previous record €16.5 billion purchased in the inaugural week of the SMP. Furthermore, as has been disclosed before on Zero Hedge, with a regular (T+3) settlement on SMP purchases, this means that the full weekly total will not be clear until next week's number is announced, and the presented number is only indicative of the pre-settled purchases of Italian and Spanish bonds. As before, what happens under the SMP is irrelevant (although is occurring as predicted by Zero Hedge back in November, when we said the SMP total is about to double as the crisis spreads) since the only thing that matters is when and how big the EFSF will become. Continuing monetizations at this rate under the SMP is political suicide (because make no mistake: the ECB is nothing but a political player now) for JC Trichet and his Italian soon to be replacement. We can't wait to hear Germany's reaction to the fact that cumulative SMP purchases (and thus "Weimar" risk) increased by 30% in one week.

 

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Mon, 08/15/2011 - 09:55 | 1561298 No Bid
No Bid's picture

That's sustainable.

Now let's see them pay sterilization costs below the repo rate indefinitely...

Mon, 08/15/2011 - 10:09 | 1561356 ZeroPower
ZeroPower's picture

Yes, the ECB has to pay > their min bid rate for Repos to attract any sort of deposits.

Mon, 08/15/2011 - 10:21 | 1561390 jm
jm's picture

This has intent to shock and awe written all over it.  P & L is not the issue.

Unfortuneately, expect a French ratings downgradeout any day now to undo it all. 

Mon, 08/15/2011 - 10:28 | 1561408 No Bid
No Bid's picture

the rate paid by the ecb last week was 101bps.  repo rate is 150bps.

they can't pay a rate higher than the repo rate without giving banks an arb opp between them, which would be bad.

 

so the question is how much longer can they keep the sterilization rate below the repo rate.  with buys of this size, not long.

Mon, 08/15/2011 - 13:54 | 1562231 janus
janus's picture

ZP,

i tried to find it on my own...what is meant by +T3 settlement?

and as to your statement above about min bid rate and repos, is that why there's a negative rate of return on cash deposits nowadays? which, to my simple thinkin, would seem to repel deposits...is all this shit really as fatuous as it seems on its face?  or am i just out in left field.

Mon, 08/15/2011 - 09:57 | 1561304 papaswamp
papaswamp's picture

insanity bitchez!!!  Rally on all is well! Ignore the Hong Kong GDP contraction, ignore the empire state manf. contraction, ignore the ECB saddling the Germans with massive debt....the debt machina is alive and well..... man this train wreck is going to be huge!!!

Mon, 08/15/2011 - 10:05 | 1561340 Scottj88
Scottj88's picture

We definitely have a worldwide mess, not just a single country/currency problem.  What an interesting time to be alive and aware, no?

http://thehardrightedge.com/wethepeople/

Mon, 08/15/2011 - 09:57 | 1561305 Ivanovich
Ivanovich's picture

This explains this morning's EUR/USD pop up over 150 ticks in 30 minutes.  Wait, no...er...who knows.

Mon, 08/15/2011 - 09:57 | 1561308 oogs66
oogs66's picture

eurobonds will not happen...germany is going to freak out about these purchases, though the fact that 22 billion could move the bond markets so much is both sad and scary

Mon, 08/15/2011 - 10:03 | 1561332 Dr. Engali
Dr. Engali's picture

Germany has freaked out about everything throughout this whole crisis, yet they still gave into the bankers every step of the way. This will be no different.

Mon, 08/15/2011 - 10:00 | 1561315 Josephine29
Josephine29's picture

Actually it is much worse than this as highlighted below.

Care is needed with the 22 billion Euros spent buying Italian & Spanish bonds as it only represents settled trades so actual figure is higher @notayesmansecon
i wonder how high the real number will go?
Mon, 08/15/2011 - 10:06 | 1561341 Tyler Durden
Tyler Durden's picture

"Furthermore, as has been disclosed before on Zero Hedge, with a regular (T+3) settlement on SMP purchases, this means that the full weekly total will not be clear until next week's number is announced, and the presented number is only indicative of the pre-settled purchases of Italian and Spanish bonds"

We wonder what would happen if commentators actually read our posts...

Mon, 08/15/2011 - 10:55 | 1561505 steve from virginia
steve from virginia's picture

 

... and nobody knows what happens to those Spanish and Italian bonds after they are in ECB's hands.

The mystery is where Trichet 'gets the money' since sterilization is 'inadequate' to the task under the same circumstances that make Italian and Spanish bonds 'too damned risky'.

Let's not forget the French ...

What is that Bernanke dude up to? He wouldn't be buying Italian and Spanish bonds using the ECB as a front, would he?

Would he?

Mon, 08/15/2011 - 10:08 | 1561354 Dr. Engali
Dr. Engali's picture

Ouch. You got taken to the woodshed by Tyler :)

Mon, 08/15/2011 - 10:00 | 1561316 Boilermaker
Boilermaker's picture

This is GREAT!  Christ, I didn't know all you had to do was montize the shit out of debt to get the equities markets up.  WOW!

Mon, 08/15/2011 - 10:04 | 1561335 Ned Zeppelin
Ned Zeppelin's picture

Where is the USD vs yen and Euro and there is your explanation for any equities pop.

Mon, 08/15/2011 - 10:08 | 1561351 Boilermaker
Boilermaker's picture

....and REITS and Banks doubling the broader market gains?  Every single day since their recent lows?  Really?

Mon, 08/15/2011 - 10:01 | 1561319 Central Wanker
Central Wanker's picture

The daily Olli Rehn quote:

"Big European countries like Spain, Italy and France will not need to tap into the rescue fund,"

http://www.independent.ie/business/european/big-euro-countries-like-spai...

Funny that he mentions also France in the list of big-troubled-but-not-really-troubled countries...

Mon, 08/15/2011 - 10:08 | 1561350 speconomist
speconomist's picture

I would swear he said the same about Greece not too long ago!!

Mon, 08/15/2011 - 10:12 | 1561364 whirlybird rules
whirlybird rules's picture

Rehn is a bloody fool, but he says what he's told and has no problem showing his face the next day.  

Mon, 08/15/2011 - 10:20 | 1561388 Dick Darlington
Dick Darlington's picture

That liar denies everything. Remember when he was "CONfident", his favorite word, that no other country won't need assistance after Greece was bailed out the FIRST time? Remember how "CONfident" he was abt Portugal back in the days and two weeks after saying that Portugal went tits up? Now this douche is denying and lying again and the fact he mentioned France shud scare the shit out of everybody, esp the germans. ECB is playing the game once again by buying the spanish and italian toxic waste. Remember when the start of the ECB's SMP-program was cheered to make all things golden? And how has it worked in the past? Massive collapse in peripheral yields first and then gradual slide back to the levels before ECB purchases and then rapid rise to record levels since the inception of euro. Same misguided policies continue and the only thing we'll ever get out of those policies is MORE debt.

Mon, 08/15/2011 - 10:03 | 1561326 Ned Zeppelin
Ned Zeppelin's picture

reminds me of that old Clash song, "Spanish Bonds."

Mon, 08/15/2011 - 10:07 | 1561346 digalert
digalert's picture

"as has been disclosed before on Zero Hedge"

ZH riding the global financial tsunami...

hanging ten!

Mon, 08/15/2011 - 10:09 | 1561355 Snidley Whipsnae
Snidley Whipsnae's picture

Germany will return to the DMark or whatever the new currency is called... ties with Russia will become closer, new trade agreements with Russia will be negotiated, a new world order is coming.

But it isn't the one envisioned by Rock and Roth...

Germany can compete with China head to head and have proven it. The countries that have competitive manufacturing will get the bulk of the worlds resources... and those that provide 'financial services' will get screwed... just as it should be... Mr Market always wins in the end.

If you want it even simpler... the country that can generate the most REAL gdp from a barrel of oil will wins this game.

Before we can end up there we will go through... denial, anger,  bargaining, depression, and finally... acceptance.

Mon, 08/15/2011 - 10:12 | 1561366 swissaustrian
swissaustrian's picture

Manufacturing jobs in Germany soared 3,1% yoy.

The weak EUR is a blessing in the short term.

The general population is totally clueless about what´s really going on.

Mon, 08/15/2011 - 10:15 | 1561374 Snidley Whipsnae
Snidley Whipsnae's picture

"The general population is totally clueless about what´s really going on."

Not nearly as clueless as the population of the US...

Mon, 08/15/2011 - 11:09 | 1561550 LawsofPhysics
LawsofPhysics's picture

Nicely put.  The energy factor is the ultimate denominator for everyone.  I would expand you comment to include any energy source.  Bottom line, he who can do the most with the least amount of energy will "win".

Now what exactly they will "win" is in question.  The only other question mark is who their customers will be.  if the world is, for the most part, broke, then where are the customers coming from?  Mars?

Mon, 08/15/2011 - 10:10 | 1561360 swissaustrian
swissaustrian's picture

The EUR loves it!

Mon, 08/15/2011 - 10:15 | 1561375 Tsunami Effect
Tsunami Effect's picture

It helps to be insane when you are living in a mental institution!

Mon, 08/15/2011 - 10:17 | 1561382 MFL8240
MFL8240's picture

More prosperity from the printing press.

Mon, 08/15/2011 - 10:18 | 1561383 sangell
sangell's picture

Well there is 'national' political suicide but there is life after death in the EU! A failed national politician can be ( and often is) 'relaunched' as a 'supranational' politician in Europe. Thus a Romano Prodi type who can't win elections in Italy can aspire to a EU bigwig sinecure and travel the world as a representative of a dream.

Mon, 08/15/2011 - 10:21 | 1561392 Flore
Flore's picture

And the euro is Up against the USD.. how about that Tyler... you guys should study the MTM gold on the ECB balancesheet.. you really should

Mon, 08/15/2011 - 10:24 | 1561399 THE DORK OF CORK
THE DORK OF CORK's picture

If the ECB allowed the destruction of shadow bank debt sector in 2008 it would not need to buy sovergin debt in 2011.

Fiscal debt is just money needed to pay down malinvested private debt - nothing more.

Its intellectually  childish to moan about sov debt buying by a CB after it has made its decision to save all private credit.

They destroyed the currency back then - whats going on now is merely a accounting entry.

Mon, 08/15/2011 - 10:30 | 1561414 Snidley Whipsnae
Snidley Whipsnae's picture

Correct DC... and the same events are unfolding in the US due to the same mistakes in 2008. The only difference here is that the US Gov/Fed can print money at will...

But, the US States cannot and they are as BK as the PIIGS...

austerity coming to a state near you soon...

Mon, 08/15/2011 - 10:40 | 1561448 scatterbrains
scatterbrains's picture

The fed did 8 trillies of interest free swaps, created out of thin air, to EU banks and the Germans are going to do what again to who ?

 

Mon, 08/15/2011 - 10:44 | 1561471 LawsofPhysics
LawsofPhysics's picture

So the fuse of the EURO-BOMB is lit.  Anyone have any thought on the length of that fuse.  QE forever.  Got physical?

Mon, 08/15/2011 - 10:49 | 1561484 Curtis LeMay
Curtis LeMay's picture

Tyler,

"Since it takes a couple of days for purchases to settle, it is likely that the central bank purchased more bonds last week than Monday's settlement number indicates, with analysts at Barclays Capital saying earlier Monday they expected the settlement figure to be between €22 billion and €25 billion, but actual bond buys for the week to total €30 billion."

http://online.wsj.com/article/SB1000142405311190339290457651014073990993...

So now the ECB holds about $150 bn in "non-performing"/will never perform euro junk paper...

The ECB is for all intents and purposes broke, and even worse: in the hole a $150 billion...

Mon, 08/15/2011 - 11:00 | 1561519 Boilermaker
Boilermaker's picture

They're ramming the piss out of the XLF and IYR.

There must be bad news tomorrow.  Why not game the shit out of it today while you can, i guess.

Mon, 08/15/2011 - 11:16 | 1561572 ILoveTheWorld
ILoveTheWorld's picture

Sorry to bother. Have been trying to understand the difference between QE and SMP. I thought the ECB wasn't allowed to do QE as the only thing it should do is control inflation. So SMP is not QE...but what then? Italy's Banca Centrale emits bonds, and the BCE buys them with money coming from where? the EFSF? and where does the money in the EFSF come from if the BCE can't print it?

If anyone has a good link that explains the difference, I would be really thankful.

Mon, 08/15/2011 - 11:41 | 1561665 ThirdCoastSurfer
ThirdCoastSurfer's picture

If the EFSF is initially to be funded with 440 and the ECB has already drawn 150 against it, then another way to look at it is the EFSF has a remaining balance of 290 or about 65%. 

Mon, 08/15/2011 - 12:22 | 1561729 Curtis LeMay
Curtis LeMay's picture

Not so.

Don't forget Greek, Portuguese and Irish bailouts already spoken for/allocated, and which comes directly out of the same funds/money pit, the ESM/EFSF...

In short, Trichet will be looking on the floor for pennies anytime soon.

Mon, 08/15/2011 - 12:08 | 1561756 tom
tom's picture

This may be a minor point but I believe that 22b euro included some Irish and Portuguese.

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