ECB Resumes Buying Bonds With Gusto As Italian Yields Remain Well Wide Of 7%

Tyler Durden's picture


The ECB released its update of SMP purchases in the week ended January 6 (so with settlement through Wednesday): following two weeks of barely any acquisitions (€19MM and €462MM in the two weeks prior), the most recent number was €1.1 billion so gradually we are getting back to normal. The total amount of gross purchases is now €218.4 billion and €213 billion net of maturities. This will also be the amount the ECB will have to sterilize, hopefully without hiccups. Naturally, the more money is parked with the ECB, the less is available for sterilization. And since the total under the SMP will only keep rising, very soon the ECB will likely hit a plateau beyond which it will become increasingly difficult to successfully sterilize the entire weekly rolling amount. And the worst news is that despite the hundreds of billions in "sterilized" (when the banks are kept alive by the central bank, is it really sterilized?) monetizations, Italian yields are once again well over 7%, and the spread of Bunds is now back to a nosebleed inducing 522 bps: how long until LCH wakes up again and hikes margins sending the entire European bond complex a step function lower?

Full ECB SMP history:

SMP vs Italian Bond yields:

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Mon, 01/09/2012 - 10:50 | 2046417 pendragon
pendragon's picture

nosebleed bitchez


Mon, 01/09/2012 - 10:51 | 2046422 Cognitive Dissonance
Cognitive Dissonance's picture

Everything looks normal to me.................normal for a slow motion car wreck.

Mon, 01/09/2012 - 10:54 | 2046430 Irish66
Irish66's picture

What did Banco Santandar do to raise capital

Mon, 01/09/2012 - 11:02 | 2046451 kito
kito's picture

they started to sell tapas at their branches...........

Mon, 01/09/2012 - 12:09 | 2046636 Manthong
Manthong's picture

Tapas are the teaser..

Profits are in the sherry and Sangria.

Mon, 01/09/2012 - 11:03 | 2046434 hedgeless_horseman
hedgeless_horseman's picture



If the ECB bought them all would the average European even notice? 

I doubt it.  The only question they even know to ask is, "What color of armband are we to wear this season?"

Not enough kookie freedom lovers left in that gene pool, if you ask me.

Mon, 01/09/2012 - 11:03 | 2046456 mayhem_korner
mayhem_korner's picture



Armband-du-jour = MASH unit emblem

Mon, 01/09/2012 - 11:00 | 2046445 richard in norway
richard in norway's picture

i just checked the price of unicredit, its down 43% today! thats on top of the double digit falls last week. bailout before the end of the week?

Mon, 01/09/2012 - 11:02 | 2046452 Irish66
Irish66's picture

It has to get to 1.94

Mon, 01/09/2012 - 11:03 | 2046457 LawsofPhysics
LawsofPhysics's picture

Why not below a dollar?  Seriously.

Mon, 01/09/2012 - 11:09 | 2046474 Irish66
Irish66's picture

It could.  But  the play is a bounce off 1.94 for a 10 minute, 10 second trade

Mon, 01/09/2012 - 11:13 | 2046481 richard in norway
richard in norway's picture

unicredit was over 15 euros in june, today its just over two and half. its in worse shape than bank of america. btw the real reason that italian bonds are yeilding over 7% is the bailout of italian banks is being priced in, imo

Mon, 01/09/2012 - 11:20 | 2046501 richard in norway
richard in norway's picture

sorry just took another look, latest price is €2.28

Mon, 01/09/2012 - 11:21 | 2046504 Gandalf6900
Gandalf6900's picture

I think you are confused my friend

Mon, 01/09/2012 - 11:00 | 2046446 whoisjohngalt11
whoisjohngalt11's picture

E.U better enjoy this bump while they can when the O-bumpster gets reelcted the whole world is going to dry up (credit wise) and the fun will ensue...

Mon, 01/09/2012 - 11:04 | 2046459 Mitzibitzi
Mitzibitzi's picture

I fear it won't take that long to go pear-shaped. End of Q1 2012 is my guess.

But then, I wasn't expecting to get past last September without 'interesting times', so I'm forced to admit that TPTB do have this can-kicking lark down to a fine art. Who knows, might take them years to blow the entire world up, yet!

Mon, 01/09/2012 - 11:05 | 2046463 TheSilverJournal
TheSilverJournal's picture

Italy is too big to be allowed to default. The banking system can't handle writing off Italian debt. When the ECB fully backstops Italian and Spanish debt, the European crisis will pause and the spotlight will shine fully on the US debt problem, which is worse than Europe's. debt problem.

Mon, 01/09/2012 - 11:08 | 2046470 azzhatter
azzhatter's picture

My theory precisely

Mon, 01/09/2012 - 11:14 | 2046484 qussl3
qussl3's picture

And it will eventually ping pong back on the EZ in due course.

Collapse is going to be one slow drawout mofo, only wildcard is potential energy spikes.


Mon, 01/09/2012 - 11:42 | 2046563 fredquimby
fredquimby's picture

Via the UK and Switzerland?!

Mon, 01/09/2012 - 11:17 | 2046472 Cone of Uncertainty
Cone of Uncertainty's picture

There is something elegant about a chart that can capture so much clusterfuck douchebaggery financial engineering fraud and abuse, that it makes me want to fall to my knees and cry tears of joy and amazement.

Mon, 01/09/2012 - 11:09 | 2046473 Roy T
Roy T's picture


OT-Jim Paulson from Wells Capital on CNBC right now is like a broken record every time he is on.


If we can get this to happen, and this and then that, viola the market will be charging higher.  That is his basic message every time I see him.  Why would anyone put money with this guy?





Mon, 01/09/2012 - 11:16 | 2046491 Cone of Uncertainty
Cone of Uncertainty's picture

Probaby spoutin the same bulshit as that fucking shill that was also on CNBC this morning:

Bob "The Shill" Doll

Mon, 01/09/2012 - 11:25 | 2046515 Instant Wealth
Instant Wealth's picture

... with earning season ahead, those hopium pipes are puffing.

Mon, 01/09/2012 - 11:10 | 2046475 Snakeeyes
Snakeeyes's picture

The ECB's balance sheet is even bigger than the Fed's and the SMP and other measures are doing little to no good.

Mon, 01/09/2012 - 11:10 | 2046476 valley chick
valley chick's picture

let the downgrades commence....

Mon, 01/09/2012 - 11:34 | 2046538 ebworthen
ebworthen's picture

Unicredit getting crushed with Italian bonds still over 7%


How much money does Draghi have for buying bad debt?

Does he have more than worldwide capital markets?

Mon, 01/09/2012 - 11:35 | 2046543 100pcDredge
100pcDredge's picture

When I hold my laptop screen in a certain angle this graph looks just like da boot. From Italy. Is this a coincidence?

Mon, 01/09/2012 - 11:49 | 2046578 ArkansasAngie
ArkansasAngie's picture

The illusion of control.

No there will not be government crowding out?  Ben's got everything working like clockwork?

Maybe ... these yahoos need to stop thinking of it as their money.

Mon, 01/09/2012 - 12:08 | 2046630 slewie the pi-rat
slewie the pi-rat's picture

just a w-wide glut of IOUs written so certain peeps and their friends could act like they own the fuking place

...for a while...

Mon, 01/09/2012 - 12:26 | 2046701 Troublehoff
Troublehoff's picture

there's a certain fractal-like pattern to these purchases - give it another 18 months and I'll get back to you


I'm guessing more (and bigger) intervention ahead


perhaps the money system can function perfectly well like this - we offset deflation by monetizing debt... forever - what could go wrong

Mon, 01/09/2012 - 13:33 | 2046953 PMakoi
PMakoi's picture

LOL, yes... if it looks like money and acts like money, it must be money.  I want to be able to buy crap and rehypothecate it into something that I can spend too!

Mon, 01/09/2012 - 14:44 | 2047251 cathrynm
cathrynm's picture

I hate to expose my confusion to the world, but, I don't think I've ever really understood exactly what is meant my 'sterilization' here.

Mon, 01/09/2012 - 15:21 | 2047376 smiler03
smiler03's picture

@ Cathrynm  Putting the taxpayers balls in a vice and tightening it.

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