Europe Drops Most In 3 Weeks As LTRO Stigma Hits New Highs

Tyler Durden's picture


With Chinese and European data disappointing and Weidmann commenting on the futility of the 'firewalls' (as we discussed earlier) ahead of the discussions later this week, European equities dropped their most in almost three weeks over the last two days closing right at their 50DMA (the closest to a cross since 12/20). Credit markets (dominated by financial weakness) continue to slide as the LTRO euphoria wears off. The LTRO Stigma, the spread between LTRO-encumbered and non-LTRO-encumbered banks, has exploded to over 107bps (from under 50bps at its best in mid Feb when we first highlighted it) and is now up over 75% since the CDS roll as only non-LTRO banks have seen any improvement in the last week. Aside from Portugal, whose bonds seem to be improving dramatically on the back of significant Cash-CDS basis compression as opposed to real-money flows as the spread between Bonds and CDS has compressed from 500bps to 250bps on the back of renewed confidence in CDS triggering, sovereign bond spreads are leaking wider all week with Italy and Spain worst.


Europe's broad equity market dropped most in 3 weeks and ends right at its 50DMA...

And financials are bearing the brunt of the selling as LTRO-encumbered banks have been battered realtive to non-LTRO (so much for that non-existent Stigma eh Mario?)...


Credit and equity moving together though XOver remains a little excessive relatively speaking which is noteworthy given its more high beta nature. This suggests the pressure is focused on the financials (which in turn drags the IG (main) index down (wider))...

Sovereigns have been leaking wider all week in bond-land (less so in CDS as bonds catch up to them)...

but Portugal stands out (removed from chart above for scaling) down 130bps this week - which is driven seemingly by a dramatic compression in the CDS-Cash basis as confidence in sovereign CDS encouraged risk-takers back into the trade - i.e. basis traders willing to accept less premium for CDS non-trigger risk as the basis is massively wide compared to others still,..



Charts: Bloomberg

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Wed, 03/28/2012 - 12:09 | 2297539 Irish66
Irish66's picture

Bove kiss

Wed, 03/28/2012 - 12:22 | 2297581 HD
HD's picture

Bove has no creditability. None.  For him, banks are always a buy.  He'd tell you to buy Wamu in the pink sheets with your last dollar if you asked him.

Wed, 03/28/2012 - 12:54 | 2297649 AN0NYM0US
AN0NYM0US's picture

then again Mnuchin ex Goldman guy bought Indymac back in the day with lots of FDIC guarantees


and the sweetheart deal

the gift that keeps on giving

Wed, 03/28/2012 - 14:51 | 2298131 RollinsArline3
RollinsArline3's picture

my classmate's sister makes $67/hour on the laptop. She has been without a job for 6 months but last month her pay was $20212 just working on the laptop for a few hours. Read more on this web site .....

Wed, 03/28/2012 - 15:12 | 2298210 Dead Canary
Dead Canary's picture

My sisters, brothers, mothers aunt makes $250 on a lapdance. HA!

Wed, 03/28/2012 - 12:09 | 2297541 monopoly
monopoly's picture

And have a nice day!

Wed, 03/28/2012 - 12:20 | 2297576 PersonalRespons...
PersonalResponsibility's picture

Well now, that's uber bullish.  Time to BTFD.

Wed, 03/28/2012 - 12:23 | 2297585 SwingForce
SwingForce's picture

Looks to me the LTRO banks are in demand. The story ended before saying what the problem is.

Wed, 03/28/2012 - 12:23 | 2297589 Dr. Engali
Dr. Engali's picture



"European equities dropped their most in almost three weeks over the last two days closing right at their 50DMA (the closest to a cross since 12/20"


In other words just BTFD as the algos kick in and ramp it up.

Wed, 03/28/2012 - 12:27 | 2297601 mayhem_korner
mayhem_korner's picture

Sovereign bonds


I wonder - is "sovereign" is the new catch-phrase for "high yield"?  (We don't use the word "junk" anymore, just like "used" cars are "pre-owned")

Wed, 03/28/2012 - 13:12 | 2297751 Nobody For President
Nobody For President's picture

Sovereign bonds mean from a country with a fiscal policy ("more debt, but only this year, next year we will be good") but no monetary policy, 'cause monetary policy is off in Belgium somewhere, or maybe Berlin...

Wed, 03/28/2012 - 13:09 | 2297747 slewie the pi-rat
slewie the pi-rat's picture

on the back of renewed confidence in CDS triggering, BiCheZ!

they got the chips in the cage

let 'em fail!

2, 4, 6, 8,
if you're elite, negotiate!

Wed, 03/28/2012 - 13:34 | 2297822 Schmuck Raker
Schmuck Raker's picture

There's never been a better time to buy Portuguese bonds.

Buy 'em now, before it's too late!

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