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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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Tue, 05/15/2012 - 12:09 | Link to Comment tallen
tallen's picture

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

Tue, 05/15/2012 - 12:26 | Link to Comment spastic_colon
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!

Tue, 05/15/2012 - 12:53 | Link to Comment Stoploss
Stoploss's picture

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

Tue, 05/15/2012 - 13:27 | Link to Comment EBR MOD 0
EBR MOD 0's picture

which one of those is more better?

Tue, 05/15/2012 - 14:02 | Link to Comment Lets Hang Parliament
Lets Hang Parliament's picture

Err...do you mean betterer?

Tue, 05/15/2012 - 16:07 | Link to Comment youngman
youngman's picture

Parkay...its not betterer

Tue, 05/15/2012 - 19:52 | Link to Comment Freewheelin Franklin
Freewheelin Franklin's picture

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

Tue, 05/15/2012 - 12:34 | Link to Comment CvlDobd
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

Tue, 05/15/2012 - 15:49 | Link to Comment John Wilmot
John Wilmot's picture

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

Tue, 05/15/2012 - 12:11 | Link to Comment evolutionx
evolutionx's picture

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

banks deposited

788B overnight

CDS exploding

everything red like blood

http://www.cds-info.com

Tue, 05/15/2012 - 12:11 | Link to Comment firstdivision
firstdivision's picture

Dumping Euro Fins and buying QQQQ none the less.

Tue, 05/15/2012 - 12:11 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

It's always darkest worsterer just before the end.

Tue, 05/15/2012 - 12:55 | Link to Comment BlandJoe24
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.

Tue, 05/15/2012 - 12:14 | Link to Comment barlie
barlie's picture

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

Tue, 05/15/2012 - 12:16 | Link to Comment Xkwisetly Paneful
Xkwisetly Paneful's picture

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

Tue, 05/15/2012 - 12:29 | Link to Comment Zero Govt
Zero Govt's picture

the Liberal Party in Britain is broke ..just like the Tory Party and Labour Party in fact

..so 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

Tue, 05/15/2012 - 12:38 | Link to Comment Xkwisetly Paneful
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.

Tue, 05/15/2012 - 12:45 | Link to Comment mclant004
mclant004's picture

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

Tue, 05/15/2012 - 12:51 | Link to Comment Paul Atreides
Paul Atreides's picture

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

Tue, 05/15/2012 - 13:18 | Link to Comment ThirdWorldDude
ThirdWorldDude's picture

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

Tue, 05/15/2012 - 13:27 | Link to Comment Jack Napier
Jack Napier's picture

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

Tue, 05/15/2012 - 12:55 | Link to Comment i_call_you_my_base
i_call_you_my_base's picture

You are like a child that needs constant attention.

Tue, 05/15/2012 - 12:15 | Link to Comment midgetrannyporn
midgetrannyporn's picture

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

Tue, 05/15/2012 - 13:19 | Link to Comment Savyindallas
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.  

 

Tue, 05/15/2012 - 13:19 | Link to Comment Savyindallas
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.  

 

Tue, 05/15/2012 - 12:16 | Link to Comment Dick Darlington
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...

Tue, 05/15/2012 - 12:17 | Link to Comment tekhneek
tekhneek's picture

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

Hmm...

Tue, 05/15/2012 - 12:23 | Link to Comment Zero Govt
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

Tue, 05/15/2012 - 12:22 | Link to Comment Dick Darlington
Dick Darlington's picture

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

 

*KRUGMAN 'FAIRLY OPTIMISTIC' EUROPE WONT RESULT IN BANK MELTDOWN

 

LOL!

Tue, 05/15/2012 - 15:47 | Link to Comment John Wilmot
John Wilmot's picture

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

Tue, 05/15/2012 - 12:21 | Link to Comment Debtless
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.

Tue, 05/15/2012 - 12:57 | Link to Comment Manthong
Manthong's picture

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

Tue, 05/15/2012 - 12:24 | Link to Comment PR Guy
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.

Tue, 05/15/2012 - 12:31 | Link to Comment insanelysane
insanelysane's picture

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

Tue, 05/15/2012 - 12:32 | Link to Comment pleseus
pleseus's picture

LTRO was a poision pill.

Tue, 05/15/2012 - 12:37 | Link to Comment DebtSlaveZombie
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...

IMO...

Tue, 05/15/2012 - 12:47 | Link to Comment Broccoli
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.

Tue, 05/15/2012 - 12:55 | Link to Comment TonyCoitus
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.

Tue, 05/15/2012 - 13:02 | Link to Comment ArrestBobRubin
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"

Tue, 05/15/2012 - 14:06 | Link to Comment DebtSlaveZombie
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.

Tue, 05/15/2012 - 15:11 | Link to Comment Angus195
Angus195's picture

I agree....so 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.

Tue, 05/15/2012 - 15:45 | Link to Comment John Wilmot
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.

Tue, 05/15/2012 - 12:52 | Link to Comment ArrestBobRubin
ArrestBobRubin's picture

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

S'all good

Tue, 05/15/2012 - 13:03 | Link to Comment pkea
pkea's picture

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

Tue, 05/15/2012 - 12:55 | Link to Comment Tao 4 the Show
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?

Tue, 05/15/2012 - 13:57 | Link to Comment Non Passaran
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": http://www.foxnews.com/world/2012/05/15/none-injured-after-hollande-plan... 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.

Tue, 05/15/2012 - 13:00 | Link to Comment disabledvet
disabledvet's picture

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

Tue, 05/15/2012 - 14:09 | Link to Comment Quinvarius
Quinvarius's picture

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

Tue, 05/15/2012 - 15:39 | Link to Comment John Wilmot
John Wilmot's picture

Equity = Janet Rossi

Tue, 05/15/2012 - 13:46 | Link to Comment earleflorida
earleflorida's picture

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

Tue, 05/15/2012 - 13:57 | Link to Comment Piranha
Piranha's picture

its gonna end bad, now its up to Ben and Mario to save the market

Tue, 05/15/2012 - 14:07 | Link to Comment rsnoble
rsnoble's picture

Thank god it was announced today that recession in the EU has been avoided.  Nevermind the crashing banks and burning buildings. Stupid motherfuckers.

Tue, 05/15/2012 - 14:39 | Link to Comment Vince Clortho
Vince Clortho's picture

Ministry of Statistics can show us graphs that prove beyond question that there is no recession.

Tue, 05/15/2012 - 14:07 | Link to Comment Quinvarius
Quinvarius's picture

It is because the banks are all about to fail that we will have massive QE.  The overall market is a secondary concern.  The economy is of no concern.  They might as bring out the bazooka this time and fix the problem.

Tue, 05/15/2012 - 14:39 | Link to Comment Vince Clortho
Vince Clortho's picture

It has worked so well in the past.

Tue, 05/15/2012 - 15:36 | Link to Comment John Wilmot
John Wilmot's picture

Indeed it has. The folks talking about the "failure" of central planning don't seem to appreciate that it works out very very well for the central planners. Failure? No, HUGE success.

Tue, 05/15/2012 - 14:10 | Link to Comment Alejandrito
Alejandrito's picture

I think the euro bazooka is comming soon. June its a good month for it, but...

ESM is released July 1.

http://www.cmfb.org/pdf/2011-04-07%20Eurostat%20preliminary%20view%20on%...

Tue, 05/15/2012 - 14:15 | Link to Comment Alejandrito
Alejandrito's picture

Stoxx 600 banks are at minimous 20 years. Is going to do Mario something? i believe he does.

 

http://chart.finance.yahoo.com/z?s=SX7E.Z&t=my&q=l&l=on&z=l&a=v&p=s&lang...

Tue, 05/15/2012 - 14:43 | Link to Comment FreeNewEnergy
FreeNewEnergy's picture

It's fucking over, folks. Ben and his merry band of central bankers are letting the air out of the balloons. Look out below.

Deflation is a mutha and eventually, nothing can stop it. All the preppers who bought meats and canned goods at high prices last year are going to be kicking themselves because prices will be even lower in the fall.

The great reset everybody's been asking for is finally upon us. It has almost everything to do with the US elections. Rigged and set up for Adolph Romney. Seig Hiel!

Prepare for the US police state once the Bain capitalist gets into the White House. No more food stamps, disability checks, etc. Just die, bitchez,

That seems to be the ultimate plan, and it's back to feudalism for the next fifty years. Any of you guys and gals with kids, I do really feel sorry for them. They're going to grow up in a world that will be vastly different from the one we knew.

 

Tue, 05/15/2012 - 15:02 | Link to Comment the not so migh...
the not so mighty maximiza's picture

Geeeez, what a downer

Tue, 05/15/2012 - 17:24 | Link to Comment DebtSlaveZombie
DebtSlaveZombie's picture

Haha.  Sobering up after a drunkfest and awakening to a jail cell and a totaled car with 3 people dead usually is a downer.  But, hey, don't blame this on the US govt.  Those mortgage loans weren't mandatory.  Neither was that second home in Phoenix, or that RV you purchased on home equity loans.  Greed...is good...but only when the market keeps going up dumbasses.  Greed will always exist.  But its the timing of that greed that means everything.  Greed at market bottom = Savy........Greed at market top = Pig.  And there's the formula for success. HAHAHAHA!!!  Gold has a long way to go from here....1,200 at least, but I say we will test the big 1K mark.  I have krugerrands for sale, (sorry Tyler, times are tough, im pedeling gold) at spot + 10.00 if you're interested.  All day.  Please take these off my hands.  I need the cash to buy 'em back at 1,000.00

Tue, 05/15/2012 - 15:29 | Link to Comment John Wilmot
John Wilmot's picture

(in reply to the purple screaming fellow far above)

I seem to recall a certain Labour Party cunt PM liquidating most of Britain's gold around $300/oz....they have 9000 tons says you, show it to me says I.

Tue, 05/15/2012 - 16:20 | Link to Comment youngman
youngman's picture

they mentioned bank runs today...a first...but i bet is has been going on for awhile....In Greece for sure.......but I would be too if i lived in Spain or Italy...but the big joke is people are running to the dollar as a safe haven....I bet China, Russia , and India are not....when the smoke settles i think they will have a few more tons of the golden metal.......and if i was them...I would be selling their treasuries as fast as they can while they are hot....gold down is crazy to me...to me its a last gasp by the banks to "settle" the markets down.....or should I say scare them back to normal....I don´t think its going to work...anyway..I am not buying Apple..or Facebook....so I am toast....

Tue, 05/15/2012 - 18:41 | Link to Comment Youri Carma
Tue, 05/15/2012 - 19:53 | Link to Comment Freewheelin Franklin
Freewheelin Franklin's picture

"Dumpfest"? They must be drinking a lot of water from Mexico.

Tue, 05/15/2012 - 20:08 | Link to Comment Tom Green Swedish
Tom Green Swedish's picture

Can I be both long the dollar and gold?

Wed, 05/16/2012 - 03:09 | Link to Comment cnhedge
cnhedge's picture

Greece: when the lights go out
http://www.cnhedge.com/thread-4650-1-1.html

Do NOT follow this link or you will be banned from the site!