Euro-Dumpfest Continues As LTRO Banks Implode

Tyler Durden's picture

Just when you thought you'd seen the worst, its gets worsterer. While US equities are oscillating in a broad range trying to ignore the Eurocalypse, European asset markets had one of the worst days of the year today across the board. Spanish and Italian bond spreads are 40bps wider this week alone (adding 15-20bps today) and Portugal (sorry Stevie) are 52bps wider this week as our prediction that a compressed basis would remove any technical support for the bonds has come true. With sovereigns deteriorating rapidly, and given the forced contagion of the LTRO program, it is no surprise that financials are imploding. Senior and Subordinated credit spreads are underperforming dramatically with Subs +90bps and Seniors +55bps in May, while high-yield credit is 100bps wider and broad European equities (Bloomberg's BE500 index) are tracking them lower now practically unchanged for the year (and back below its 200DMA). Of course, while Greek bank runs are accelerating (and are likely beginning in Spain) and ASE is at all-time lows, the hope remains that if things get ugly enough, the ECB will save the day and Draghi will magically re-appear. The hope of another LTRO is meaningless, though likely inevitable, as it will only exacerbate the stigma that we have been so accurate on. With collateral in short-supply, especially in Spain, any further encumbrance will crush LTRO-facing bank debt and equity-holders via subordination and so it may make sense to be even more long the 'stigma' divergence between LTRO and non-LTRO.

LTRO Stigma explodes to year's highs leaving the banks that took LTRO loans at 5 month wides and near record crisis wides on average (as non-LTRO banks remain much more sane)...

It is little wonder that the LTRO banks are down, so tightly coupled with their sovereigns, since govvies are getting crushed...

but the broadest European equity index (BE500) is now unchanged for the year and has broken below its 200DMA for the first time since January...


Charts: Bloomberg

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tallen's picture

LTRO 3 in 3...2....1....

spastic_colon's picture

i know i sound like a broken record but....FB IPO in ....3.....2.....1  cant have red markets for the economic event of the century, year, month, day, hour, minute!

Stoploss's picture

We got plenty of room. We got worstest, worstester, and worstesterer.

EBR MOD 0's picture

which one of those is more better?

Freewheelin Franklin's picture

Chiffon...It's not nice to fuck with Mother Nature.

CvlDobd's picture

I'd be happy to donate to Tyler some used condoms and wrappers. He keeps mentioning that will be the backstop of LTRO 3. I'm just trying to do my part in this world.

Civil Disobedience
Civis Mundi

/sarc off

John Wilmot's picture

The corpus mundi is floating in the East River, Jamie says, "you didn't see nothin..."

evolutionx's picture

Have a look at Bank CDS and the ECB Fear Indicator: 

banks deposited

788B overnight

CDS exploding

everything red like blood

firstdivision's picture

Dumping Euro Fins and buying QQQQ none the less.

Cognitive Dissonance's picture

It's always darkest worsterer just before the end.

BlandJoe24's picture

Wouldn't be surprised if tonight's meeting between Merkel and Hollande produces a "Huge Breakthrouh" that injects some hopium and reverses the descent.  For a few minutes.

barlie's picture

Whats the CIX you use for LTRO and non LTRO banks ? Are there any EU banks that did not take LTRO ?

Xkwisetly Paneful's picture

ANy idea how much gold the avg broke liberal euro shithole has to liquidate?

Zero Govt's picture

the Liberal Party in Britain is broke ..just like the Tory Party and Labour Party in fact there's no liberal Gold to liquidate if that's what you mean

..always a good pointer for voters to vote for bankrupt parties to run the country

Xkwisetly Paneful's picture

The UK has at least 9,000tonnes and probably more.

Thanks to those evil banksters, liquidating gold has not had to happen.

Just funny reading all of these posts decrying the central banks' actions all the while same posters benefitting immensly from them.

mclant004's picture

9000 tonnes? what are you basing this on? Good for them if they do.

Paul Atreides's picture

Fuck off troll, tell your boss your shit doesn't fly on ZH.

ThirdWorldDude's picture

+1 for showing your Muad-Dib potential...

Jack Napier's picture

I was literally just going to post this. +1 across the board.

i_call_you_my_base's picture

You are like a child that needs constant attention.

midgetrannyporn's picture

Thought China was going to fix all this. Bang Dae-Ho

Savyindallas's picture

China is doing their part  -they're working night and day to send Ben extra ink for the printing presses. Ben is ready to bail out Europe  -and california-and whoever else Obama needs to help out. He'll even provide the ink for the wedding invitations for all the gay weddings that will be announced.  The guy is like the cheap slut whore who can't say no to anyone. He just wants to be understood and loved.  


Savyindallas's picture

China is doing their part  -they're working night and day to send Ben extra ink for the printing presses. Ben is ready to bail out Europe  -and california-and whoever else Obama needs to help out. He'll even provide the ink for the wedding invitations for all the gay weddings that will be announced.  The guy is like the cheap slut whore who can't say no to anyone. He just wants to be understood and loved.  


Dick Darlington's picture

When will the Spanish and Italian covered bonds issued by the same insolvent banks face the ugly reality? So far those still "trade" in magical LTRO-inspired vacuum MASSIVELY tighter than the sovereign bonds. Must be the high quality spanish mortgage collateral, lol. Keep an eye on those puppies...

tekhneek's picture

Last time the spreads were that wide S&P hit low 1100s within a few days...


Zero Govt's picture

"..Draghi will magically re-appear.."

Yeah like Blowjob Ben he keeps providing 'solutions' and blow me (not literally) if the bubble monkey doesn't keep coming back with ever bigger patches for the balloon

...roll on that 5 Star luxury shindig, Davos 2012, the financial worlds premier showcase event of financial innovation

Dick Darlington's picture

Worry not my dear friends. The all mighty Nobel Prize winning eCONomist offers his soothing insight:





John Wilmot's picture

I'm fairly certain Krugman sucks farts out of Bernanke's asshole.

Debtless's picture

Another day another implosion, or dead canary, or bank run or flashing red light or ....


Wake me up when its all over and gold is $10,000 per gram.

Manthong's picture

Less painful to stay passed out until it hits $10K/grain.

PR Guy's picture


I was showing a picture of a swan to my kid last night. She said: "Do you get black swans Daddy?"

Out of the mouths of babes eh?

I can feel the flutter of its wings in my hair.

insanelysane's picture

and Cramer tells his kids, "Some black swans just shit on my portfolio."

pleseus's picture

LTRO was a poision pill.

DebtSlaveZombie's picture

How is gold not getting plastered right now?  Dump that gold kiddies... Its gonna be a bloodbath at the COMEX...

Wow, I would not wanna be long gold over the weekend or overnight tonight.  The Euro is gonna get destroyed between here and next week...


Broccoli's picture

Cause money printing is ultimately all the statists know in the long run. Kind of like how bad news is good for equities because it means QE is more likely. Doesn't mean you are not right in the short term.

TonyCoitus's picture

I opened a position in GLL this morning to hedge my physical.  Who the fuck knows what's going to happen? Soytently not I.

ArrestBobRubin's picture

The real question is how the only Real Money in the whole joint is not skyrocketing right now. Or do you actually believe the USD is a "safe haven"?

So gold is "Risk Off", and the USD is "Risk On"

Yeesh. Please search "Bizarro World"

DebtSlaveZombie's picture

The sad but true reality is the system is set up to penalize those that hold "real" money during a system breakdown like this.  I hold 50 ounces of physical gold in various forms and about 1,000 ounces of physical silver.  I try to hold true to the 2/3 gold 1/3 silver investment thesis in physical bullion.  But, if you'll notice, Euro and gold are tied together at the ankles, and as the Euro sinks, it takes gold with it.  Basically, the dollar as a reserve currency prevents gold from decoupling from this reality, and when the euro sinks, it pulls down the physical markets.  If the Euro sinks to 1.20, which it will, gold MUST follow suit.  The dollar is the safe haven, not because its safe, but because of its reserve status.  End of discussion.  Hedgies will also liquidate long positions into dollars, KILLING the gold and silver market.  2 years from now?  Gold 2,500 or 3,000.  2 months from now?  Gold 1,200.  Gold has to go down before it goes up, and since I see the Euro approaching par with the dollar... look out below.

Angus195's picture

I as your analysis goes, when gold dips to $1,200 (maybe less) LOAD UP!!!  I have been nibbling at silver on the way down (dollar cost averaging) because when the 'spring' on silver is 'triggered,' it will be hard to get in....HARD MONEY IS THE ONLY MONEY.  The world in 36 months is going to look very different from now.  Kinda of exciting.  This system needs to go, and so it will.

John Wilmot's picture

I'd say that's about right, except I think 1200 is a little low, and parity is a little low. I don't see the eurocrisis going that far. We'll see though, it all depends on how much pain the eurolords feel the need to inflict on the euroserfs to convince them of the need for fiscal union - which is and always has been the raison d'etre of this whole farce, FYI.

ArrestBobRubin's picture

Who f*ckin' cares, gold is down and the markets are.... UP

S'all good

pkea's picture

bullish or bearish for chase?  if dimon said their position went bad after march I guess bearish

Tao 4 the Show's picture

U.S. 10 Yr T-Note below 1.8

FWIW, this has been a floor for many years. Norcini says that a weekly close below that level signals that the bond market is predicting major deflation.


Is this a signal you can take to the Bernank?

Non Passaran's picture

Yes but he also answered the question by saying that's where Bernank will consider reaching for CTRL+P.

O/T: On way to his date with Mrs. Merkel, Hollande's plane had some "minor issues": Good that nothing happened and I say this primarily because the resident conspiracy lunatics would flood the site with their usual when-you-don't-know-who-to-blame-you-know-who-to-blame content.

disabledvet's picture

But equities are higher! I don't understand the hub-bub...

Quinvarius's picture

They know QE is coming, but if they are made to wait....

earleflorida's picture

hmmmm... 200DMA --- that ain't good