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ECB's 3Y LTRO Huge Demand: Safety, Not Risk-On
With expectations around EUR300bn, the EUR489bn print is well above expectations.
*ECB ALLOTS EU 29.7BLN IN 98 DAY REFINANCING TENDER
*ECB AWARDS EU489 BLN IN THREE-YEAR LOANS VS EST EU293 BLN
*ECB SAYS 523 BANKS ASKED FOR THREE-YEAR LOANS
The initial reaction seems to be risk on as EUR is rallying. Gold and Silver are also rallying. Stocks and CONTEXT rallying but BTPs not reacting aggressively yet.
The over-expectations print suggests more a safety net against short-term debt maturities than new borrowing for the carry trade (banks have been actively derisking in the last few months and we would be surprised if new borrowings were used to relever). Furthermore, the 'over' print makes one wonder how much more pickup there will be at future offerings thus suggesting the leaking wider in BTPs (for example) reflects the market's selling the news (or discounting of the flow expectations).
We assume the major peripheral banks were the most active in taking up this cheap money.
Via ING, NOTE: number of participating banks 523 vs 1,121 at ECB’s June 2009 1-yr LTRO: van Vliet
As an aside we also note that the ECB allotted USD33bn in 14d dollar refi tender earlier - compared to around USD5bn previously as the need to window-dress for year end seems huge.
UPDATE 1: Broad risk assets leaking lower now after initial positive reaction
UPDATE 2: BTPs now 25bps wider than early morning tights
Chart: Bloomberg and Capital Context
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Will be funny when no one turns up during the sterilizations.
What are you suggesting? That central bank sterilization might fail? Can´t be, Draghi is infallible...
Edit: In Stockholm we had a nice little 30 minute rally. Half life of government intervention is now closing in on zero seconds. At 11:17 I went short the index, now I´m back at zero. Exactly half an hour. Crude was a bit quicker, 27 minutes for a weelbarrow full of free banker money to come and go.
these are repo trades, there is no sterlization....
It's simply the ECB creating a term repo market to offset the total collapse of the private market...
so why did gold ,silver and futures just nose dive after spike up...this happened around 5 30ish am...
i was all excited with the rise...now .....
Free money - Pigs in heaven.
We are doomed....
http://www.youtube.com/watch?v=w7RIgs3eygo
There is no printing...
O.K. So is this just back door QE?
Imo, yes it is. Because it is a Open market operation by a Central Bank that is not motivated for targeting a set interest rate. It is to increase liquidity and the money supply mainly as it has already commited to a 1% discount base rate.
And we all know what a screaming good job the liquidity pump in the USA has done turning the economy around......
The Euro is on sound footing again. No need to worry.
How many good new full-time jobs did this create...
They fixed it............again.
Hooray........again.
More fixes than a Trabant and just as smelly
Classic buy the rumor, sell the news. After all, nothing really changed, zEurope is still as insolvent as yesterday.
The LTRO is a success.
What is also extremely interesting is this:
...The ECB said it allotted $33 billion at a two-week dollar swap operations, up from $5.122 billion allotted at a seven-day tender last week. A total of 34 banks made bids for dollar liquidity at a fixed rate of 0.57%, compared to 12 bids made for dollars at the seven-day operation last week...Will this mean that EU banks will "stop" their "forced" selling of USD assets? This should mean a possitive of max 33*10 Billion (less selling) if everything were in leveraged accounts.
Massive Euro Tarp.
Laugh all you want but the Trabant was a very reliable "car"
Not comfortable but reliable
All 18 Hp - That is- East german horsepower (which they starved). It was a a piece of Shit.
The only plus was the body would not rust.
They are now a Collectors item
"How many people does one need to build a Trabbi?
Two. One folds, the other one glues."
or
"how do you double the value of a trabant? Fill up the tank!"
or my favorite
"A new Trabi has been launched with two exhaust pipes -- so you can use it as a wheelbarrow."
26 Hp
The world is awash with cheap money; and we all LOVE to back a winning strategy. Yesterday we burnt you! Today we 'incense' you! You're the KING LTRO! Rock, rock my risk asset cradle to "Wuthering heights!"
OOps, keep that fizzle going, I don't want my bubbly without bubbles please!
TARP ZIRP LTRO FITZ FATZ BUMS... Does anybody really care HOW banker asses are covered?
I do - today I paid $10 for a burger. A plain Burger. Doubled in a year ( and it was inedible)
Your going to understand one day that they starved you because of self entitlement
they're still .99 cents in the US and are edible.
And 10yr Italian bonds are moving "from the lower left to the upper right corner", to quote Dennis Gartman.
ECB 3-year loans are being by the banks used to: (a) retire massive amounts of wholesale funding (i.e., non-deposits) that mature; (b) add liquidity to year-end balance sheets; and (c) a distant second or third, buy gov't debt at a decent spread. None is a sign of strength. European banks are beginning a massive depressive contraction in credit too as they use proceeds from maturing loans not to make new loans but to retire maturing funding to improve their capital ratios.
ECB balance sheet increasingly consists of junky loans and junky soverign debt.
I bet some of it covers the banks runs...
Somehow this all seems strangely familiar....remind me again... how did this play out in the USA?
$490Bn seems like an awful lot.
20% down payment will get you ..............
Into debt
Further
keeping up with the Jones is getting.....
Lame.
Its the debt stupid and until that is addressed you have the same problem, increasing problem
its really risk on....
This morning's equity market action in Europe and U.S. equity index futures action is positively astounding. The LTRO news is, what, 2+ weeks old? The exact 489B euro print is obviously new and above consensus, but what to make of yesterday's (12/20) pop on both continents? Was it amateur hour to to assume that this was already priced in?
Eugene Fama theorized about forms of market efficiency... I wonder whether his views should be updated with a variant that is a grade below his 'weakest form' (i.e., least efficient).
So say I was Italy...and I see all this money sitting out there just for the taking/stealing....would I move up my bond sales to get while the gettin is good.....si si si..we we we..
Italian banks go Irish! Ponzi schemes apparently have no limits...
*ITALIAN BANKS ISSUED ABOUT EU40 BLN STATE-BACKED BONDS :UCG IM
*MONTE PASCHI ISSUED EU10 BLN STATE-BACKED BONDS FOR ECB LOANS
*INTESA ISSUED EU12 BLN STATE-BACKED BONDS FOR ECB LOANS :UCG IM
*UNICREDIT ISSUED EU7.5 BLN STATE-BACKED BONDS FOR ECB LOANS
*BORSA ITALIANA GIVES ITALIAN BANK COLLATERAL DATA IN FILING
So they issue bonds for themselves and dump them at the ECB as a collateral.
So Italy issues bonds to themselves and the ECB is backing them? Doesn't change the fact that they are flat broke, correct? As for the ECB...what happens when this goes bust? Take down the EU and then some?
Italian banks are issuing bonds to themselves, gubbmint "guarantees" them, and then the banks dump the bonds to ECB as a collateral for 3 yr loans @ 1 %.
Nope, doesn't change a damn thing. Well, maybe for the worse. ECB is left with the "collateral" issued by insolvent banks and guaranteed by an insolvent state. Where does that leave ECB? Well, you can probably figure that out. ;-)
Damn Dick, I just got my coffee and you are blaming me
Hi Irish, sorry for ruining your morning coffee. Not blaming you, i blame the banking cartel.
Bverrrry Eenterezting:
"German financial market regulator Bafin wants to limit the ability of Unicredit's (UCG IM) unit in the country to funnel liquidity and capital to its parent, according to an unidentified German regulator" -RanSqkCan (which is now #10 sized) kicked to gain a 4-6 month cushion until banks again begin to run low. It's when it reaches 55 gal drum size they break their foot. Or they may just assume since Japan can keep printing and loaning without consequence, why not do the same. For all intents and purposes, the yen should be worthless. It is fiscally and demographically impossible for the Japanese to pay back without continuing to print. Until the world calls them on it, this type of shceme will continue.
Citizen slavery continues.....
futures are already pooping out. My 8am Leisman will have to be jumping up and down like a rabid monkey to try to keep them above water.
Very ill-liquid markets, however, equities are likely to continue higher. "Risk" to find support and continue higher. Here is a look at the ES, DX, and TNX. http://bit.ly/uYmE8m
The little guy is getting financially squezed as all this cheap money is heading to the banks (and other financial institutions). It is unfair!!!