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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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Mon, 11/07/2011 - 10:56 | 1852933 rumblefish
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why is the market up? oh ya, all the posive economic news......

Mon, 11/07/2011 - 10:57 | 1852937 Roland99
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yeah...I was  futures were down modestly and now it's about a 100pt turnaround?

I guess a yak farted in Tibet.

Mon, 11/07/2011 - 11:49 | 1853199 Roland99
Roland99's picture

Guess someone gave that yak some down now.


Mon, 11/07/2011 - 11:02 | 1852963 bnbdnb
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Its just a pump, nothing new.

Mon, 11/07/2011 - 11:12 | 1853007 GeneMarchbanks
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Mon, 11/07/2011 - 11:19 | 1853040 JohnG
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Mon, 11/07/2011 - 11:21 | 1853046 GeneMarchbanks
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You started it.

Mon, 11/07/2011 - 11:30 | 1853088 JohnG
JohnG's picture

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

Mon, 11/07/2011 - 11:12 | 1853010 pmcgoohan
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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.

Mon, 11/07/2011 - 11:18 | 1853031 Cdad
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 in today.

Mon, 11/07/2011 - 11:33 | 1853104 pmcgoohan
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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

Mon, 11/07/2011 - 11:41 | 1853152 Cdad
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.

Mon, 11/07/2011 - 14:23 | 1853976 Vaiman
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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???  

Mon, 11/07/2011 - 10:57 | 1852936 Lady Heather...UNCLE
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...he is only doing God's work, give Draghi a break <sarc off>

Mon, 11/07/2011 - 11:16 | 1853021 Mr Lennon Hendrix
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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.

Mon, 11/07/2011 - 10:57 | 1852938 Cassandra Syndrome
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See Brent Crude today?

Mon, 11/07/2011 - 11:15 | 1852990 CrashisOptimistic
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$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.

Mon, 11/07/2011 - 11:18 | 1853032 GeneMarchbanks
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See the latest article on ZH?

Mon, 11/07/2011 - 10:58 | 1852940 Unprepared
Unprepared's picture

Haa! I called bullshit last week bitchez

Mon, 11/07/2011 - 10:58 | 1852941 Oquities
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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?

Mon, 11/07/2011 - 11:01 | 1852958 agent default
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Mon, 11/07/2011 - 11:19 | 1853033 High Plains Drifter
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chinks talking about labor laws?  man that is a real gas........

Mon, 11/07/2011 - 10:58 | 1852942 Lady Heather...UNCLE
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MillionDollarBonus should head a Central Bank.

Mon, 11/07/2011 - 11:00 | 1852953 homersimpson
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with JD Subprime and Robotrader as Primary Dealers..

Mon, 11/07/2011 - 10:59 | 1852943 prophet
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High stakes for headless states.

Mon, 11/07/2011 - 10:59 | 1852945 Iam Rich
Iam Rich's picture


Mon, 11/07/2011 - 10:59 | 1852948 EZT
EZT's picture

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

Mon, 11/07/2011 - 10:59 | 1852949 homersimpson
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What can you say? Socialism is expensive..

Mon, 11/07/2011 - 11:00 | 1852954 pendragon
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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?!

Mon, 11/07/2011 - 11:00 | 1852955 Everybodys All ...
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Mario Draghi, Hank Paulson, Tim Geithner, Ben Bernanke, etc. Is there any real difference in monetary policy amongst them?

Mon, 11/07/2011 - 11:00 | 1852956 RiskAverseAlertBlog
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Endgame. I gotta go check the tire pressure on my wheelbarrow.

Mon, 11/07/2011 - 11:01 | 1852959 slaughterer
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Super Mario's shopping spree is the solution to EUs problems.  /sarc

Mon, 11/07/2011 - 11:02 | 1852960 LawsofPhysics
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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.

Mon, 11/07/2011 - 11:14 | 1853018 Cthonic
Cthonic's picture

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

Mon, 11/07/2011 - 11:02 | 1852965 agent default
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So Berlusconi is in a position to blow up the ECB now?  Good.

Mon, 11/07/2011 - 11:40 | 1853106 slewie the pi-rat
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hey, Ag_default!

this a graphic of clown car memories!

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

Mon, 11/07/2011 - 11:03 | 1852966 Zero Debt
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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.

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...

Mon, 11/07/2011 - 11:03 | 1852971 gojam
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 ?

Mon, 11/07/2011 - 11:05 | 1852977 pendragon
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Mon, 11/07/2011 - 11:09 | 1852993 qussl3
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.


Mon, 11/07/2011 - 11:11 | 1853004 pendragon
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aren't the ecb's existing holdings going to be transferred to the EFSF at make whole as ecb can't take losses?

Mon, 11/07/2011 - 11:15 | 1853020 qussl3
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.

Mon, 11/07/2011 - 11:18 | 1853030 pendragon
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

Mon, 11/07/2011 - 11:19 | 1853034 gojam
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.

Mon, 11/07/2011 - 11:04 | 1852975 qussl3
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Mon, 11/07/2011 - 11:06 | 1852980 Dr. Engali
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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

Mon, 11/07/2011 - 11:07 | 1852987 Hansel
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Are we still supposed to be pretending that these purchases are "sterilized" somehow, that this is not pure money-printing debt monetization?

Mon, 11/07/2011 - 11:11 | 1853003 kaiserhoff
kaiserhoff's picture

The "market" loves throwing good money after bad.

Mon, 11/07/2011 - 11:26 | 1853060 JohnG
JohnG's picture

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

Mon, 11/07/2011 - 11:07 | 1852988 Tic tock
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Tyler, 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?

Mon, 11/07/2011 - 11:14 | 1853013 Unprepared
Unprepared's picture

The vigilantes have been sorting the list of next targets to attack by ascending order of size.

Someone just inadvertedly pressed the Z>A button.

Mon, 11/07/2011 - 11:18 | 1853027 dwdollar
dwdollar's picture

The contagion seems to be following the path of most incompetent leadership on down.

Mon, 11/07/2011 - 11:22 | 1853047 Unprepared
Unprepared's picture

How dare you call Berloscuni an incompetent?

He's very good at what he does.

Mon, 11/07/2011 - 11:37 | 1853136 kaiserhoff
kaiserhoff's picture

Ahem..., I think you mean whom he does.

Mon, 11/07/2011 - 11:08 | 1852991 kito
kito's picture

ecb and the merkozy will learn that berlusconi may like pussy, he, unlike gpap, is not one.......

Mon, 11/07/2011 - 11:11 | 1852994 sabra1
Mon, 11/07/2011 - 11:09 | 1852996 BanksterSlayer
BanksterSlayer's picture

but I can redeem my Italian bonds for Italian gold, right????


Mon, 11/07/2011 - 11:14 | 1853016 kaiserhoff
kaiserhoff's picture

Italian tungsten, if you're lucky;)

Mon, 11/07/2011 - 11:10 | 1852998 BlueStreet
BlueStreet's picture

Anyone else feel like they are wasting their lives trading this market?  

Mon, 11/07/2011 - 11:30 | 1853085 tj3
tj3's picture

Still no S&P500 index quote (i usetoknow the symbol) and it appears I'm not going to be stopped out of ZSL. If it was another day I might have gone balls to the walls here.

Mon, 11/07/2011 - 11:30 | 1853092 High Plains Drifter
High Plains Drifter's picture

its a complete waste of time watching this continuing never ending marx brothers movie .....that is for sure.........

get gold and silver and lots of it........and forget about this paper chase..........they are going to do what they are going to do......

Mon, 11/07/2011 - 11:12 | 1853008 tj3
tj3's picture

From OPEN to this post and countintg 10:10 MY GOOGLE has no S&P500 index quote.

So, Hey Buddy, could you give a Bloomberg terminal to a fellow american down on his luck.


Mon, 11/07/2011 - 11:13 | 1853014 Lady Heather...UNCLE
Lady Heather...UNCLE's picture

I guess this is the issue that vexes me and causes me to square up short equities position on every dip. The printing that is goi ng on is fast and furious. Why shouldn't equities roar in such a monetary loose (and fiscally loose) environment. Have been a buyer of physical gold the past year (aided by a 'strong' NZD), but my bearish stance on US equities is switched to neutral. When alot more bears think like me, then the top might be in. But for now?...who the fuck knows.

Mon, 11/07/2011 - 11:26 | 1853024 High Plains Drifter
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berlusconi is still pissed off because daddy won't let him munch on the wafer,,,,,,,,

Mon, 11/07/2011 - 11:19 | 1853036 Dr. Nancy
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All that's happening in the world's economies is predictable, as there are 7 stages that every major economy goes through. Those who know how it works profit & massive wealth is transferred to them. Several months ago I learned this information from a millionaire whose site I found & am sharing it with everyone I know.

His free video

"How To Create Incredible Wealth in Today's Economic Crisis"

is at:

Hope this info helps everyone as much as it has me.

Dr. Nancy


Mon, 11/07/2011 - 11:27 | 1853071 High Plains Drifter
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its real easy nancy . just get gold and silver and lots of it............

Mon, 11/07/2011 - 12:57 | 1853569 slewie the pi-rat
slewie the pi-rat's picture

pay attention, h_p_d

there might be quiz!

Mon, 11/07/2011 - 11:19 | 1853041 Bohemian Clubber
Bohemian Clubber's picture

These italian politician clowns will be the ice on the cake this time.

Mon, 11/07/2011 - 11:24 | 1853053 Lady Heather...UNCLE
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in  5 hours (2200GMT to 0300GMT) the S&P moved up over 22 points!!!!...unbefuckenlievable (or just another fraction of a day in Willy Wonka land)

Mon, 11/07/2011 - 11:36 | 1853121 Captain Kink
Captain Kink's picture

Draghi should call up the Vatican for a bailout.  For all of europe.  The protestant work ethic is what the north has (and what we used to have here in the 'States).  The profligate south (read catholilc) states will bankrupt the whole...I suspect The Vatican could write a check today that would go a long way...

Mon, 11/07/2011 - 12:12 | 1853319 transition
transition's picture

A whopping 188bn  lol.

We'll laugh at your retarded remarks in a few months when all CB will monetize trillions to avoid deflation.

Mon, 11/07/2011 - 13:52 | 1853841 Grand Supercycle
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Latest NASDAQ chart porn suggests fun times ahead:

Mon, 11/07/2011 - 14:22 | 1853971 MarcusLCrassus
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Italy to ECB: I'd like a quarter pounder with cheese.  Chop chop!  Also if you can get me a beer from the fridge that will be great. 

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