Five Times Is Not The Charm For ECB BTP Intervention Today

Tyler Durden's picture

As 10Y BTP spreads to Bunds hover around 25bps wider on the day, the ECB's bluff has not only been called but they have been the sucker at the table no less than five times already today. With the spread between 2Y and 10Y BTPs also having dropped (yield curve flattened) over 30bps, the Italian bond complex is sending some rather disturbing messages. And for all those who feel the need to blame speculators - CDS is actually outperforming bonds as real money leaves Berlusconi's Bonds in a hurry.

It seems the EUR88 line is an important level of defense - but then again so was EUR90 and EUR89 when we passed through them! More importantly, BTP spreads to Bunds are now 12bps off recent tights and 23bps wider on the day...


UPDATE: Since we posted BTPs have accelerated downwards - basically leaving all ECB purchases for the day now under water:

Chart: Bloomberg

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agent default's picture

The end game is near.

Hard1's picture

If you think PIIGS was polictically incorrect, wait for the Fucking Pigs











Greece *again* and we hope this place is not Germany


Hard1's picture

Some people junking my previous comment as an impulse reaction to their Minksy moment, presumably from the first two countries in the list, as the rest have mosty realized that they are in deep "trouble" by now.  That's why my favourite quote from American Beauty is "You'll be amazed by the power of denial"

Arius's picture

"we hope this place is not for Germany"

excuse my ignorance by WHY NOT? are they better than the rest of us???


nonclaim's picture

They are in a far better position than most. They still have a constitutional court, ffs.

Bodhi's picture

The waiting is the hardest part...

FMR Bankster's picture

And can take a hell of a long time. The debt bomb created by World War one was kicked down the road for 10 years before it all collapsed in 1929-1933. Very similar situation. Too much debt, interlocking relationships of the debt, and an attempt to believe it can all work out in the long run.

Ghordius's picture

good way to see it - I would say half of the WWI US debt bomb blew up in 1929-1933, the rest petered down until 1941

Leopold B. Scotch's picture

Intervention postponed and prolonged the purge that should have resolved all the inital (intervention made) problems, but for the Hoover intervention to short circuit the natural normalization. 

Hoover = FDR Lite.  Certainly no liquidationist, never mind the wisdom advised by Andrew Mellon.  And so began the first prolonged depression in the USA, courtesy of interventionista class finally having enough consolidated power to really mess things up badly.

SheepDog-One's picture

Yea in the 1930's all trades were still placed over a teletype, stock quotes were listed in a newspaper page once a day, and news took 1-2 days to reach the things dont take as long.

WonderDawg's picture

And this debt bomb has already been ticking since 2000.

SheepDog-One's picture

Yep, we're not just starting the countdown timer right now, its been ticking for a decade at least.

agent default's picture

1929-1933: US largest employers: GM, Ford etc

2011: US largest employer: Wallmart

What me worry?

Fips_OnTheSpot's picture

we are in the middle of it - and the outcome is not "a perfect world for goldbugs" - I fear.

qussl3's picture

Cant hedge, sell the crap.

Unintended consequences.

Dick Darlington's picture

Zee price stabeeletee!!!

Leopold B. Scotch's picture

Unga... Unga Galunga.  So i figure I got that going for me.

GeneMarchbanks's picture

Sucks to be Draghi...

YesWeKahn's picture

I don't see any problem, the market is trying to rally off low. It's still 20% higher than the Oct low.People clearly filtered out all bad stuff and only focus on hope.

SheepDog-One's picture

LOL, ok thanks for droppin by ZH Steve Liesman.

qussl3's picture

The problem with hope is that you eventually have to face reality.

Hangovers are a bitch.

SheepDog-One's picture

Yep, this 3 year long crack, meth, and screw top fortfied wine bender hangover is going to be a real skull splitter.

qussl3's picture

They could just snort more tho.

This bitch has legs yet.

JimRogers's picture

Hope in one hand, shit in the other. Which hand fills up faster?


SheepDog-One's picture

I dare you to cross THIS line! Oh yea? Well now I dare you to step across THIS line! Hmmm...OK well now I DOUBLE dare ya to step across THIS line!

Global Hunter's picture

Sounds like my mother in law trying to keep her dogs in line

DormRoom's picture

Once Italy falls it's pretty much over.  The ECB, like the Fed, has been preoccupied with propping up the speculative economy, and now its real economy is collapsing. 


shut it down.




Also, traders selling bonds can hedge (currency arbitrage).  ECB can only buy bonds, and can't hedge.  Thus it will always be in a losing position. shut it down.

LawsofPhysics's picture

Just like watching the previews at the theater "Coming soon to a debtor bond market near you".

pendragon's picture

stupidity knows no bounds

Ethics Gradient's picture

26bps and accelerating.

Make that 27.

Edit: sorry, that's just the increase in yield. Now 27 and a bit

qussl3's picture

How soon before ECB capital is wiped?

Lucky for them gold is up.


Ghordius's picture

duh, for a Central Bank capital is (sadly? regretfully?) irrelevant

only reserves matter for a CB and they are not needed often

qussl3's picture

If all else fails.

Well you know the drill.

On a more serious note, you seem pretty in the know about the eur, does there even exist a trigger where the ECB would be forced to mark that PIIGS crap to reality?

If there isnt one, then well capital really doesnt matter i suppose.


Ghordius's picture

well, yes, there is a "trigger" for all banks, and I call it "the regulator's patience"

Mr. King of the Bank of England, for example, is preparing the Commons on a new principle I call "the CB does not like your way of banking"

but guess who is the ECB's regulator? The European Central Bank. I'm not really sure they even really have to publish something, by the way

Dr. Engali's picture

Dollar cost averaging.

transition's picture

Typical boring ZH stuff : oh loooook the market moved down !!!!

Two days later, oh look the market moved up (this must be a conspiracy) !!!!!


rinse & repeat.

Tyler Durden's picture

Or, if you were here two years ago, instead of confirming we really need to step up our admission screening process, you may have read this post from April 2010: "Italy is next" which confirms that if you get the big picture right (you are surely long gold?), intraday moves are completely irrelevant but they do add to the dramatic appeal.

SheepDog-One's picture

He didnt stand on the porch long enough.

In Project Mayhem, you do not ask questions. 

Ghordius's picture

Tyler, I, for example, am "surely long gold"

I, on the other side, sometimes would wish you, as the publisher of my beloved ZH, would make a differentiation between

- rumors that are going to be relevant for today's markets (important but not for me)


- facts that are going to be relevant for the future (very important for me)


The ECB is going to support the BTP until... the bazooka-that-isn't is going to take over.

The ECB is going to use "the handbook" on this, and "the handbook" is one of the differences between the FED and the ECB.

It says that any CB intervention has to be as intransparent as possible and has to take the market by surprise, for maximum effect.

Following this, Draghi might or might not "test" how deep he needs to let the BTP fall until real appetite grows and then have a massive intervention. Which, translated in the current context, might even be a "floor" à la CHF. Should you shout "impossible" or "this would be a well without bottom" please note two facts:

- the SNB floor is working - i.e. other floors can work, too, if the CB uses it's strenghts and not it's weaknesses

- the Germans are the first and foremost of all EMU countries that enforce the "BundesBank Principle" on the ECB, i.e. they will endorse what you would call "Monetary Dictatorship". Even if they get sick just contemplating the bet.

How do you price in a Draghi Surprise? One that "slaps the speculators hands"? How robust is the CDS market? How leveraged are the CDS "à la baisse" players? How much pain can they endure?

Your knowledge of Central Banks seems to be quite extensive when it comes to the FED but you have very often misunderstood (well, you and me are both not the Almighty) how the other CBs work and talk.

slewie the pi-rat's picture

i think we're all trying to separate the wheat from the chaff, factually

the SNB peg appears to be working. for now.  to you.

but is that a fact?  or a rumor?



Ghordius's picture

slewie, you rat! you are perfectly right

my god-daughter thinks yes, she has a pet theory I can't prove or disprove

her recipy: buy EUR with CHF, buy USD with EUR, buy CHF with USD

a perpetuum mobile of devaluation (to zero?) - but she thinks with the "Dollar Strenght" theme doable

slewie the pi-rat's picture

5X is not the charm...

...she is!

hmmm...maybe she'd like the slewie perpetual fiat fade:

  • buy gold & silver w/ CHF
  • buy gold & silver w/ EUR
  • buy gold & silver w/ USD

where ounces = wealth + insurance



LawsofPhysics's picture

Pretty broad statement there, I hope that isn't how you trade.  Italian bonds are going bidless, that is what this is about.  Are you saying you are buying Italian debt?  If you are, then I have some Greek debt to sell you.


This is trading site and the song remains the same, buy low sell high.  If you don't have some real useful information to contribute, please fuck off.

Ghordius's picture

I have a few friends who made a pile on Greek Bonds!

Nothing for me, I'd be sick just even thinking about.

LawsofPhysics's picture

Timing is everything.  I'd say this site is ahead of the curve on realeasing a lot of information, how you trade it is your business.

Ghordius's picture

Well, yes, ok. But the site understandably focuses on the "rumor that shakes the market" more than on all the rest.

Nevertheless, I maintain that there is a lot of misinformation and misunderstandings here in ZH about the principles of Central Banking.

Hate them or love them - understanding them is fundamental in this age.

LawsofPhysics's picture

Understanding "them" is only useful for frontrunning the idiocy of the central planners/bankers.  Sorry, I run a real business in the Agriculture sector and know what my margins look like (China buying our pecans now- so that is good).  Central bankers are paper-pushing fucknuts that still believe in infinite growth on a planet with finite resources, ALL their models depend on growth.   Moreover, innovation in a healthy economy uses capital from savings not debt.  When people invest their savings they make damn sure to do the proper due diligence.

Look, either way you slice it the laws of physics and Nature win, period.  From my perspective, my business requires a fairly high input of energy, this is what is crushing my margins.  The fact is that worldwide energy production has been flat for several years now.  This is what the real papering over is all about and even ZH seems to avoid the topic altogether.  More and more energy and capital are being sacaficed to isolate, extract, refine, and deliver less energy.  All paper going to zero.

Trading is a hobby to extract more paper to trun into more physical assets, I am investing a lot more locally to keep my employees and neighbors secure, I suggest you do the same.

Ghordius's picture

I'm with you, I agree with you and I'm in a similar situation