Europe Closes On Lows As Stigma Trade Ramps Up

Tyler Durden's picture


As we have discussed extensively, and noted this morning specifically, the LTRO is stigmatizing credit markets in Europe, no matter what European leaders or bank CEOs tell you. European credit and equity markets dropped dramatically post LTRO 2 and accelerated on Bernanke's lack of monetary exuberance. Financials underperformed but most notably, subordinated credit spreads widened significantly more than seniors holding at yesterday's wide levels. The Stigma trade is occurring in single-name credit also with the spread between LTRO and non-LTRO banks widening once again after compressing for a few days but it is the Senior-Sub spread decompression that is the liquid trade for European bank's implicit subordination for now (as the entire capital structure of LTRO banks just became subordinated at best and more levered and subordinated at worst). The EUR tumbled over 100pips towards 1.3350 as the USD rallied back to the week's highs. Silver (and Gold) crashed into the European close (down over 7% on the day at one point) while Treasuries sold off and European sovereigns leaked wider (except Portugal which crashed and Italy which compressed modestly). Quite a day.

Credit markets (and stocks) fell notably post LTRO with financials leading the fall...


The Stigma trade was focused in the spread between Senior and Subordinated credit spreads and rose significantly today...

EURUSD fell to the week's lows and DXY rose to the week's highs as USD strength dominated all the flow (except CAD).


Charts: Bloomberg

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Wed, 02/29/2012 - 13:00 | 2208454 Cognitive Dissonance
Cognitive Dissonance's picture

Buy the rumor, sell the news.

The markets ran up on the idea that the drugs were coming. Now that they are here...........

Wed, 02/29/2012 - 13:05 | 2208481 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Bernanke just said he, "Doesn't see any bubbles in the economy."  Is the dude blind?

Wed, 02/29/2012 - 13:08 | 2208499 Sophist Economicus
Sophist Economicus's picture

I don't see any bubbles in the economy either.   Now financial assets, that a different story

Wed, 02/29/2012 - 13:41 | 2208652 Manthong
Manthong's picture

Eventually most will come to understand what a stigma the FRN is.

Wed, 02/29/2012 - 13:09 | 2208504 HD
HD's picture

You'd be surprised at what you can't see - when you're not looking.

Wed, 02/29/2012 - 13:15 | 2208509 Cognitive Dissonance
Cognitive Dissonance's picture

"Is the dude blind?"

Bernanke is paid (and amply rewarded) to be blind. Considering this for just a moment, it's a minor miracle he can find the toilet in the morning and not piss all over his fuzzy bunny slippers. 

"Ummmm Ben.......nice try, but the toilet seat was down. You're doing it wrong." - Mrs Bernanke

Wed, 02/29/2012 - 13:30 | 2208611 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

You're doing it wrong.

She must say that a lot.

Wed, 02/29/2012 - 13:46 | 2208671 Cognitive Dissonance
Cognitive Dissonance's picture

Yes. Mrs Cog does say it a lot.

Oh, wait! You mean......ummm......never mind. :>)

Wed, 02/29/2012 - 13:11 | 2208519 YesWeKahn
YesWeKahn's picture

"I don't see any trouble in the housing market"


This is what Benasshole said right before the housing collapse. This idiot isn't just blind, he doesn't have eye.

Wed, 02/29/2012 - 13:19 | 2208563 surf0766
surf0766's picture

It's all part of "The Secret"

Wed, 02/29/2012 - 13:12 | 2208531 kito
kito's picture

repeat after me......"there are no bubbles in the economy...there are no bubbles in the economy.....u.s. debt did not just cross 15.4 trillion..... brother takes care of you.....we are at war with eurasia....we have always been at war with eurasia.................."

Wed, 02/29/2012 - 13:03 | 2208467 Eurogroup
Eurogroup's picture

I say, bring on all the other Stigmata!

Wed, 02/29/2012 - 13:05 | 2208487 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Reach out and touch faith

Wed, 02/29/2012 - 13:11 | 2208520 Eurogroup
Eurogroup's picture

If that is what triggers a broad downmarket, bring it on.

"Make this a better world, if you can".

Wed, 02/29/2012 - 21:05 | 2210517 StychoKiller
StychoKiller's picture

Doing my part; step up to the plate:

Wed, 02/29/2012 - 13:27 | 2208500 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

The US is trying to impolde the Europonzi before the Ameriponzi implodes.  Both are trying to implode the Chiponzi.  The Afriponzi and South Ameriponzi obviously imploded years ago.  The Japaponzi is on the brink too.  This is like Highlander....

There can be only one!

Wed, 02/29/2012 - 13:09 | 2208512 El Oregonian
El Oregonian's picture


Wed, 02/29/2012 - 13:13 | 2208532 amitmittal
amitmittal's picture

Europe finally rid of "how to pay debt" problem and liquidity in Spanish and talian bonds not to extend to extra credit except perhaps the small regional banks and two three extra rounds in the banking system before going back to ECB as deposits

amit we decode Europe for you, and there is no QE3


Wed, 02/29/2012 - 13:13 | 2208537 RobotTrader
RobotTrader's picture

JPM new highs for the move.  Another $100 million trading profit booked today, thanks to Blythe.

Wed, 02/29/2012 - 13:22 | 2208570 alien-IQ
alien-IQ's picture

man, you're just fuckin ridiculous. same stale old shit. you need a new routine.

Wed, 02/29/2012 - 13:23 | 2208583 SheepDog-One
SheepDog-One's picture

RoboTarder dont you ever get the hint that no one likes you?

Wed, 02/29/2012 - 13:28 | 2208603 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

JPM trading where it did 2 yrs ago.

Wed, 02/29/2012 - 13:18 | 2208555 alien-IQ
alien-IQ's picture

/ES looks like it's about to take the no volume creep back into positive territory.

This shit is getting old.

Wed, 02/29/2012 - 13:22 | 2208574 SheepDog-One
SheepDog-One's picture

OH poor stigmatized crack whores!

Wed, 02/29/2012 - 13:24 | 2208588 SheepDog-One
SheepDog-One's picture

'Democracy' is 2 wolves and 1 sheep voting on whats for dinner.

Freedom is the sheep with a rifle contesting the vote.

Wed, 02/29/2012 - 13:36 | 2208634 Flakmeister
Flakmeister's picture

Another link inside is great...

A growing body of psychology research shows that incompetence deprives people of the ability to recognize their own incompetence. To put it bluntly, dumb people are too dumb to know it. Similarly, unfunny people don't have a good enough sense of humor to tell.

This disconnect may be responsible for many of society's problems.

Wed, 02/29/2012 - 13:43 | 2208658 GeneMarchbanks
GeneMarchbanks's picture

Demokratia, as in the Greek sense and Western democracy are apples and oranges. Democracy accentuated an individual and personality in Antiquity, Western democracy(coupled with industrial capitalism) from the beginning tended toward uniformity and lately toward blatant vicious conformity.

There is no discussion here, you're chasing phantoms.

Wed, 02/29/2012 - 13:50 | 2208702 Flakmeister
Flakmeister's picture

I am not chasing anything... just watching the train go by... metaphorically speaking...

Hell, DK runs very strongly here the hedge on most, if not all, technical issues..

Wed, 02/29/2012 - 14:04 | 2208784 falak pema
falak pema's picture

sitting on the dock of th bay...can u sing Flak?

Wed, 02/29/2012 - 14:31 | 2208870 Flakmeister
Flakmeister's picture

"watchin' the tide roll away..."

No, I cannot sing... when I do babies cry and dogs howl...

Wed, 02/29/2012 - 16:31 | 2209506 css1971
css1971's picture

Try whistling instead. Babies love people who can whistle.

Wed, 02/29/2012 - 16:31 | 2209500 css1971
css1971's picture

The Dunning-Kruger effect. It's endemic, in business and politics. One of the reasons big companies end up as dinosaurs. People who have no fucking clue what they are doing, or what the company is doing end up running things, because they have bigger mouths.

Wed, 02/29/2012 - 18:26 | 2210081 Flakmeister
Flakmeister's picture

Not entirely....DK is not quite the Peter Principle...

They may have political skills such as the ability to not "offend" anyone, related to this is that they rarely intimidate anyone, hence, are not seen as a threat...

The DK effect is at the root of our political shitshow...

Wed, 02/29/2012 - 13:26 | 2208596 SheepDog-One
SheepDog-One's picture

So the great LTRO2 lasted for about an this shit is just great. Fuckin wizard runnin the show, I'm tellin ya.

Wed, 02/29/2012 - 13:38 | 2208640 mendigo
mendigo's picture

could someone please help me understand? did gold and silver fall because qe3 is off the table because of good new?s and I gather gold will be pressured as some are forced to liquidate over the coming year when does gold take-off?

Wed, 02/29/2012 - 13:57 | 2208738 reload
reload's picture

When the paper games run into a wall, and that may be some time.

Meanwhile most folks on here will find that their physical stash is just as shiny and heavy as it was 2 hours ago - boating accidents aside.

Paper and leveraged Gold holders may not be quite so relaxed, but markets always punish weak hands.

Wed, 02/29/2012 - 14:29 | 2208939 mendigo
mendigo's picture

the dollar and treasuries are surrogate for us style capitalidm which it turns out is not really capitalism in the free market sense when does that hit the fan? I feel that we are in the midst of a slow motion train wreck in the midst of a wreck time appears to slow and one becomes a passive observer

Wed, 02/29/2012 - 21:09 | 2210527 StychoKiller
StychoKiller's picture

March is a delivery month for Au or Ag, look it up.

Wed, 02/29/2012 - 13:55 | 2208724 Nussi34
Nussi34's picture


Wed, 02/29/2012 - 13:55 | 2208725 Nussi34
Nussi34's picture

Let´s just bomb Greece and get it over with!

Wed, 02/29/2012 - 14:00 | 2208766 Dr. Engali
Dr. Engali's picture

Stigma trade? We were told that there wouldn't be a stigma trade. Just because the banks need funds doen't mean they are weak.

Wed, 02/29/2012 - 21:11 | 2210533 StychoKiller
StychoKiller's picture

Europe:  "Your powers are weak, old man!"

The Bernank:  "If you should strike me down, I'll flood the galaxy with FRNs!"

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