Italy Calls ECB's Bluff As Mario Draghi Is Forced To Double Italian Bond Purchases, Take Total To €110 Billion

Tyler Durden's picture

When last week Italian bonds threatened to plunge every single day (to levels seen earlier today, when the spread between the 10 Year BTP and the Bund has soared to 490 bps), many speculated that the ECB intervened every single day, and occasionally two or even three times daily. Now we have confirmation that in his first week on the job, Mario Draghi is already well on route to undoing everything that his predecessor did previously: his first action as head of the ECB was a surprise lowering of rates, and now he has bought double the amount that the ECB purchased in the prior several weeks, and the most since September 16. Altogether the ECB has monetized, granted with sterilization for now until of course Europe's banks end up being unable to sterilize these purchases and the ECB ends up holding the full unsterilized bag, a whopping €188 billion since its inception in May 2010. Of this, €110 billion has been dedicated exclusively to Spain and Italy, or rather, just Italy. This is in three short months. Good luck to the ECB as its winds down its SMP program, as mandated by Germany, and the EFSF is supposed to commence buying Italian paper in the open market.

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rumblefish's picture

why is the market up? oh ya, all the posive economic news......

Roland99's picture

yeah...I was like...wtf?  futures were down modestly and now it's about a 100pt turnaround?

I guess a yak farted in Tibet.

Roland99's picture

Guess someone gave that yak some Beano...markets down now.

 

bnbdnb's picture

Its just a pump, nothing new.

JohnG's picture

Only because it's true.  "Stable" ES since open???  Pfffft.

pmcgoohan's picture

Cash rich fund managers have decided they want to be up for Christmas and are prepared to ignore any negative news, rally on positive news, rally on the denial of positive news, and rally on the denial of negative news until they get there.

Cdad's picture

If so...then why is everyone on the Street this morning shorting the crap out of the Russell?

If so...why did Jim Paulsen, a criminal syndicate Wall Street money manager, just do 3 minutes on "Self-Stimulation?"  Is that what the ECB is engaged in per Italian bonds?  And if so, and everyone knows and is dumping into it [ala Jeffries], how is this bullish?

Yours sounds like a status Quo call...and that, I think, is very dangerous right now...as in today.

pmcgoohan's picture

Its not bullish. None if it is bullish. There has been barely a single bullish headline in weeks, and the status quo is terminal. Im just sick to the core of watching the market continually shrug it all off and rally on.

Ive been short for over a month and Im not getting out now. Im just exasperated. Genuinely thinking about taking some time off somewhere remote without a laptop. Watching the paint doesnt seem to be helping to dry it out

Cdad's picture

I hear ya.  Maybe put some long RIMM against those priced for stupid consumer discretionary stocks...that might cure what ailes you.

The Russell SHOULD go down in flames today, as well.

Shorting is a tough game...but since the game is almost up, the wait time on this is very short, I suspect.  The paint will be dry soon.

Vaiman's picture

By the looks of things the markets are going to need a sledge hammer across the head before reality sets in and things start heading south.  What will that sledge hammer be???  

Lady Heather...UNCLE's picture

...he is only doing God's work, give Draghi a break <sarc off>

Mr Lennon Hendrix's picture

The states of Europe are havng a field day calling the ECB's bluff.  FIrst G Pap took them to the bank, now Silvio.  Pretty soon the ECB will look like the Fed-

Coming out of the bathroom with it's dick in its hand.

Cassandra Syndrome's picture

See Brent Crude today?

CrashisOptimistic's picture

$114, dragging WTI up with it.

And people don't understand, or don't notice, or imagine it doesn't matter.  Sooo many people are going to die so very soon and it's so very much off the radar screen.

Greece burns 400,000 barrels of it a day at these prices.  Do a X365 and you have a number that is 5% of GDP.  How can they possibly grow sending 5% of GDP elsewhere every year?  They have no crude oil production at all.

Italy burns about 1.6 million barrels per day.  X365 is 584 million barrels per year and at $114 that is 66 billion dollars, sent elsewhere because they have no oil production.  That's about 4% of GDP.

Unprepared's picture

Haa! I called bullshit last week bitchez

Oquities's picture

the head of the chinese sovereign wealth fund just said european labor laws induce sloth and indolence.  does that make him a communist capitalist denouncing socialism?

High Plains Drifter's picture

chinks talking about labor laws?  man that is a real gas........

Lady Heather...UNCLE's picture

MillionDollarBonus should head a Central Bank.

homersimpson's picture

with JD Subprime and Robotrader as Primary Dealers..

prophet's picture

High stakes for headless states.

EZT's picture

I just asked my self the same question.. Is the short squize still on?

homersimpson's picture

What can you say? Socialism is expensive..

pendragon's picture

doesn't the efsf only have leverage on what is left in pot which ain't gonna be very much at this rate? bullish for euro?!

Everybodys All American's picture

Mario Draghi, Hank Paulson, Tim Geithner, Ben Bernanke, etc. Is there any real difference in monetary policy amongst them?

RiskAverseAlertBlog's picture

Endgame. I gotta go check the tire pressure on my wheelbarrow.

slaughterer's picture

Super Mario's shopping spree is the solution to EUs problems.  /sarc

LawsofPhysics's picture

All western governments are now monetizing (printing) like crazy.  Why are the BRICs remaining silent?  They are monetizing as well.  Apparently the "bottom is further away than everyone thought.  Regardless, the race to find the bottom continues.  Boring world indeed.

Cthonic's picture

Zeno's paradox, compounded: the faster they all race, the further the bottom recedes.

agent default's picture

So Berlusconi is in a position to blow up the ECB now?  Good.

slewie the pi-rat's picture

hey, Ag_default!

this a graphic of clown car memories!

europeon politician edition of "fight club" link: Europe’s Insult Diplomacy

Zero Debt's picture


Gold flow from Hong Kong to mainland China in September jumped sixfold on the year to 56,896 kilograms, boosting the total amount of gold flow in the first nine months to 20
1,068 kilograms, more than double the quantity a year earlier, said Hong Kong Census and Statistics Department.

http://af.reuters.com/article/metalsNews/idAFL4E7M70CP20111107

Bulk of MF Global positions in Europe still open. .."Nothing has happened yet. We are waiting for it every hour. Therefore customers are reluctant to put on any more new trades before they know what has happened with the old ones," a metals trader said...

http://af.reuters.com/article/metalsNews/idAFL4E7M70B120111107

gojam's picture

Is it right that the money they are using to buy PIIGS bonds is the same money they've set aside for the 400billion Euro bailout fund ?

Sorry for being a dumbass, I'm losing track.

Are they spending money from the EFSF pot which they hope to leverage up to 1 trillion euros on these interventions in the bond market ?

qussl3's picture

Dont think so.

The ECB buys sov via its SMP prog, and it subsequently sterilizes purchases.

The EFSF is a separate entity with borrowing authority, before anything can be disbursed from it, it must first borrow the money. Its credibility is via the guarantees behind it from the 17 countries.

Someone with better knowledge please correct if wrong.

TIA.

pendragon's picture

aren't the ecb's existing holdings going to be transferred to the EFSF at make whole as ecb can't take losses?

qussl3's picture

That's the assumption, but until it happens its always fluid.

If it does happen the EFSF is spent already lol.

This is before next year's refunding, what a clownshow.

pendragon's picture

i guess that's why they kep it open whether it was 4 or 5 times leverage. at this rate they're gonna need some MF leverage

gojam's picture

Thanks qussl3 and Pendragon.

That's what I was trying to get at.

They're frittering away the capital (real or imagined) that their entire plan depends on.

Dr. Engali's picture

Whew...The Dax is above 6000 again and the dow is above 12,000 I was getting worried. I better go out and spend my new found wealth effect. Can't decide on buying more  guns or swapping my paper for real money...gold.

Hansel's picture

Are we still supposed to be pretending that these purchases are "sterilized" somehow, that this is not pure money-printing debt monetization?

kaiserhoff's picture

The "market" loves throwing good money after bad.

JohnG's picture

Yes, yes, of course.  Pay no attention to the men behind the curtains.

Tic tock's picture

Tyler et.al., why is Spain considered safer? Aren't the Housing, Personal Debt and Employment situation, like as dire as might be considered possible, short of catastrophe?