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The G7/20 Spent Trillions On Its Latest Global Bailout And All I Got Was This Lousy 2 Hour Jump In Futures

Tyler Durden's picture




 

Following the latest global bailout/intervention/rescue by the G-7/20/Earth+1, in which the ECB mostly bought bonds of yet two more insolvent European nations, futures did indeed spike from overnight lows... for about 3 hours. As the chart below shows, the nearly 30 point ES jump coincided with the moment the ECB started buying up billions in Italian and Spanish bonds, only to be prompted and very aggressively faded away. Yes, Italian and Spanish spreads and CDS all tightened substantially, but at the expense of Bunds, Gilts and French bonds, so the whole exercise is nothing but yet another risk transfer, not elimination. It took an increasingly more sophisticated market about two hours to fade the entire run up of futures into the overnight highs. And unfortunately, the G-7 has just used up yet another "get out of jail" card. So as we predicted, the latest ECB intervention will merely buy Italian and Spanish spreads at most a week if not a few short days before the push wider resumes, only this time with a new and improved wider baseline in the risk-free Bunds. But first: we prepare for the imminent downgrade of up to 7,000 muni entities, as S&P warned on Friday night. Somehow we get the feeling this move will be anything but market positive.

 

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Mon, 08/08/2011 - 06:46 | 1536254 Thorlyx
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Bailout, bitchez....

Mon, 08/08/2011 - 06:50 | 1536260 spiral_eyes
Mon, 08/08/2011 - 06:51 | 1536266 Azannoth
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What's that knocking sound ? The heads of central bankers banging against the wall!

Mon, 08/08/2011 - 07:10 | 1536291 lolmao500
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Or that nice sound of necks breaking? The sound of bankers and politicians being hanged for treason sure is nice.... and it shall soon be reality.

Mon, 08/08/2011 - 07:14 | 1536298 Weisbrot
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no, thats the depression knocking on the door

Mon, 08/08/2011 - 07:14 | 1536299 Weisbrot
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no, thats the depression knocking on the door

Mon, 08/08/2011 - 07:15 | 1536296 EscapeKey
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We don't need your central planning

We don't need more Keynesian shills

No dark pool money, chasing yield

Trichet, leave those bonds alone

(yells) Hey, Trichet, leave those bonds alone

 

All in all, it's just a nother broken market

All in all, it's just a nother broken market

 

Mon, 08/08/2011 - 07:22 | 1536316 CosmicBuddha
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Shine on you crazy diamond!

Mon, 08/08/2011 - 08:21 | 1536412 FEDbuster
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"I will try again to blow a bubble that will last all day"  Sponge Bob, The Bubble Song (the Bernank's ringtone)

http://www.youtube.com/watch?v=vdED3rVgIu4

Mon, 08/08/2011 - 06:49 | 1536258 westboundnup
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Watch for a Lehman moment (or 2) this week.  Since the market went into correction, I've been waiting for one of the highly leveraged entities (likely in Europe) to reveal that the emperor has no clothes and, in fact, has lost the ability to borrow any. 

Mon, 08/08/2011 - 07:03 | 1536283 ZeroPower
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Keep an eye out on DEXGRP, SOCGEN, UNICREDIT. UK banks have way too much gov support for any to be part of that list.

Will have to wait and see.

Mon, 08/08/2011 - 07:37 | 1536344 Thorlyx
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And you think that french banks won't have gov support ???? You kidding, right ?

Mon, 08/08/2011 - 07:41 | 1536351 ZeroPower
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Nowhere near as much is available to them. C.Agricole is the largest bank by asset base, and theyve been milking funds dry from the gov. SocGen and BNPP are the next ones who are even more active in the markets and potentially more exposed to the rubbish from 07/08 which they loaded up, but its not making the news cause focus is on PIIGS bank's first, well the remainding SPA and ITA ones that is. Soon as focus shifts, the French will fall.

UK has way too much at stake in their financial sector to have any sort of failures here.

Mon, 08/08/2011 - 07:53 | 1536366 Thorlyx
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The French may fall but before they will take everyone in the EU/EUROZONE with them and in the end they will still be standing on one leg when the others will lie on the ground. Including and especially  ze germans.

Mon, 08/08/2011 - 06:49 | 1536259 Midwest Prepper
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Seems the spike was transitory.

Mon, 08/08/2011 - 06:51 | 1536263 spiral_eyes
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gold is transitory

Mon, 08/08/2011 - 06:52 | 1536268 Thorlyx
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transition is transitory....

Mon, 08/08/2011 - 06:54 | 1536271 Azannoth
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197Au is stable with 118 neutrons - I guess no need to worry :)

Mon, 08/08/2011 - 07:00 | 1536277 EscapeKey
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In Soviet Russia, transition is golden.

Mon, 08/08/2011 - 06:50 | 1536261 Josephine29
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Someone was well ahead of the game as I saw this on twitter on Friday night.

Bear markets are characterised by short sharp rallies. The Dow Jones rallied 382 points in less than an hour yesterday.So food for thought
And earlier today
The pattern that the ECB has set for equity markets of an early rally followed by a drop looks very poor/dreadful.Sorry but there it is @notayesmansecon
Mon, 08/08/2011 - 06:51 | 1536264 jesusonline
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"They fuck you and fuck you and fuck you, and just when you think it's over, that's when the real fucking begins!"

Mon, 08/08/2011 - 06:52 | 1536267 OnTheWaterfront
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I'm dusting off my DOW 11k hat.

Mon, 08/08/2011 - 06:59 | 1536276 silvertrain
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Kinda looks like an SNB intervention back in the good ole days..Money just dont go as far as it used to..

Mon, 08/08/2011 - 07:01 | 1536279 Quintus
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This move by the ECB reflects nothing other than total panic on their part.

Despite all their talk last week of 'Conditionality' and insisting that new austerity measures were adopted in Italy and Spain before any purchasing began, they totally panicked over the weekend and began buying anyway.

They have now gambled the entire future of the Euro and the ECB itself on the following events taking place without a hitch:

1. The July 21 agreement of Eurogroup heads being approved in all 17 national parliaments swiftly and without any objections

2. The main creditor countries agreeing to an expansion of the EFSF to €2trillion - €3-trillion with no internal political or Central Bank objections.  If this does not happen the ECB will be stuck will all the bonds they are currently buying and will not be able to flip them to the EFSF.

3. The French not losing their AAA status, which would preclude them from backing the EFSF

4. The German Constitutional court ruling in September that despite being in clear breach of German and EU law, the current and future bailouts are just fine anyway.

5. Investors not taking the opportunity to dump PIIGS bonds on the ECB at attractive prices, forcing them to keep buying in amounts that cannot be sterilised.

Seems to me that the odds of all these things going without a hitch are a lot less than 50/50.  Unless the Germans issue an unequivocal statement of support for enlarging the EFSF this week, we'll be back to Euro-carnage by this time next week.

Mon, 08/08/2011 - 07:07 | 1536288 Ghordius
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Quintus, how do you explain the "withdrawal" from the markets? As a sign of weakness & panic? It's a bargaining moment: "we will not pay this price/yeld". It's way too early to see who will win this match.

Mon, 08/08/2011 - 07:10 | 1536292 Quintus
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What 'Withdrawal'?

Mon, 08/08/2011 - 07:15 | 1536300 Ghordius
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They could have gone on with the scheduled sales and did not, particularly the Italians. The "we've found some cash, we don't need more for a while" news of last week. Pricing, that's the reason.

Mon, 08/08/2011 - 07:21 | 1536309 Quintus
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I see what you mean - withdrawal by the Spanish and Italians from scheduled bond sales.

I should think it's simple enough - they couldn't pay the rates and wanted to put pressure on the ECB/Eurogroup to bail them out.

It seems to have worked.

Who knows what was being discussed over the past two weeks between the FinMins and the ECB?  One thing is clear though, the Italians didn't find any money down the back of the sofa.  I should imagine that they spun that story to the public, while telling the ECB in private, "We can't pay those rates and will default in September if you don't help us."

That's what any sensible negotiator would do.

Mon, 08/08/2011 - 07:26 | 1536323 chinaguy
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Good line of reasoning...and really, which of TPTBs objects to printing up a bunch more free money & sending the bill to the taxpayers?

Mon, 08/08/2011 - 07:32 | 1536338 Ghordius
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That's where I think the story is different: they all prepared themselves for this moment. The ECB does not want to get too high rates too soon. The Spaniards and the Italian Governments did put some cash on the side for a "dry spell".

You cannot even glimpse how much the involved Governments are angry at this "We are the bond vigilantes and we all bought the right CDS to prove it - crowd".

I suspected that much before and I got confirmation when Berlusconi hinted it in Parliament with this hyperbole "we will not spend until the end of the year". The "secret" is that the Asians wanted to see if the ECB is willing to buy when needed - and the ECB delivered the "demonstrational intervention".

The funny thing is that most Asians and most European Government think the same way about the "proper management" of those affairs, and it's not the way you learn it in business school.

The party is not over. And yes, the ESFS is just bogus, mirrors and smoke.

Mon, 08/08/2011 - 07:01 | 1536281 boricuadigm-shift
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Where do  buy that shirt?

Mon, 08/08/2011 - 07:03 | 1536282 Ghordius
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Folks, that was just the sound of the ECB artillery acquiring range. Many of you live in the world of derivatives and think too much about US Treasuries and Gilts, where the market has always been global. The Spanish and particularly the Italian Bonds markets are different, you might find out soon. The ECB kicked the can a bit further and gained some insight about how much ammo this could cost, this is all.

Mon, 08/08/2011 - 07:21 | 1536312 chinaguy
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Please elaborate

Mon, 08/08/2011 - 07:53 | 1536367 Pay Day Today
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If I could +1 you, I would.

Mon, 08/08/2011 - 07:05 | 1536285 BandGap
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C'mon, see this for what it is....that one shot of JD to get you to the next shot of JD.  But pretty soon there won't be a watering hole in town that will put up with your addiction.

I remain amazed that this is the recourse. Whn will the average man on the street see this for what it is?

The cycle is ever tightening until the collapse. 

Mon, 08/08/2011 - 07:06 | 1536286 oogs66
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the can is getting harder and harder to kick

Mon, 08/08/2011 - 07:08 | 1536290 papaswamp
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Talk about a rapid half life decay rate...wowza!

Mon, 08/08/2011 - 07:12 | 1536295 IMA5U
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where is socgen and unicredit cds trading and if they have preferreds, how are they trading?

 

tx

Mon, 08/08/2011 - 07:25 | 1536321 Tyler Durden
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235/360 mid

Mon, 08/08/2011 - 07:15 | 1536301 irishlink
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The US bank futures are reflecting their exposure to Europe and if a major Eoropean bank falls over the next 72 hrs . the whole game is up and TPTB can no longer hide ,kick or lie their way out.

Mon, 08/08/2011 - 07:17 | 1536302 Die Weiße Rose
Die Weiße Rose's picture

classic Bear-Trap: Buy The Fucking Dip, Buy The Fucking Dip....oh Shit

 catch the falling Knife  and now you're bleeding like a piig. Be afraid, be very afraid...

Australia lost another 33 billion today after losing 100 billion over the last week.

Taxpayers locked into compulsory Superannuation and Pension Funds are getting screwed once again !

So much for the V Recovery !   Wall Street is Not the economy ! It is just hopium sold to fools..

wake me up when we get close to the 9 March 2009 lows of SP 677...

that's where we left the fundamentals

 

Mon, 08/08/2011 - 07:32 | 1536337 Mister Ponzi
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Buy the dips... in Bunds, long gilts and T notes!

Mon, 08/08/2011 - 07:31 | 1536333 Mister Ponzi
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Seems like the only risk assets up in price after half a day are the ones the central banks bought directly. That looks pretty nasty!

Mon, 08/08/2011 - 07:31 | 1536336 bourbondave
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Could it be that these last gasp spikes in ES aren't aren't impotent as they seem?  Could it be the final opportunities for the big banks/financials to dump their equities on the taxpayer at better prices overnight when nobody is watching and its easier to manipulate?

Mon, 08/08/2011 - 07:34 | 1536340 papaswamp
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...and it's gone....

Mon, 08/08/2011 - 07:55 | 1536371 eddiebe
eddiebe's picture

How about this: The krauts get the gold from the waps and the spics in exchange for some credit. Behind closed doors of course.

Mon, 08/08/2011 - 08:31 | 1536435 DeadFred
DeadFred's picture

It's impressive how liitle a trillion will get these days. I remember back in the day when a trillion was worth something. This is even more pathetic than the 1 week lifespan of the trillion+/- yentervention.

Mon, 08/08/2011 - 08:43 | 1536461 eddiebe
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Hyperinflation coming to a currency near you.

Mon, 08/08/2011 - 08:52 | 1536475 Imminent Collapse
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Collapse:  Imminent

Wed, 09/14/2011 - 05:09 | 1667516 chinawholesaler
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