Is June 6th D-Day Once Again?

Tyler Durden's picture

Via Peter Tchir of TF Market Advisors,

[ZH: While we do not agree that anything will happen on Wednesday (or pre-Greek-election to be more precise) - aside from perhaps a small bump in BoE LSAP, Peter Tchir provides a useful update to our original 'full central bank menu' two weeks ago.]

The ECB meeting on June the 6th seems key to me.  Markets and economies are teetering across the globe.  More and more people are coming to the conclusion that a Greek Exit would be catastrophic. Central banks won’t want to act as though they are panicking, but neither will they want to wait much longer to act.  The regularly scheduled ECB meeting on the 6th is an ideal date for the first salvo to be fired.

Globally Coordinated Swap Lines

The easiest thing for central bankers to do in conjunction with the ECB would be to reduce the cost of the swap lines and once again extend their maturity and potential size.  This is largely symbolic.  The rate cut would help those that are using it, but 25 bps on that is not going to be a game changer for any bank in the near term.  The lines are already in place, so any maturity extension or reiteration of commitment to swap lines is purely optics.  On the other hand, it would show that once again all the major central banks are working together, are aware of the problems, and are committed to employing strategies to resolve it.  It should calm growing chatter that the Eur/USD basis swap is trending weaker lately.  An announcement like this is largely feel good, but since it costs next to nothing relative to what they are already doing, it is an easy step for central bankers to take and enhance any other policy announcements on that day.

ECB Rate Cut

The ECB should cut rates 25 bps on that morning.  It would add to the “feel good” nature of yet another swap line announcement.  The cut is unlikely to do much for sovereign debt yields.  Unlike in the U.S. where treasury yields are sensitive to the Fed’s short term rate, the connection in Europe has long been broken.  German and French yields trade far better than the ECB’s overnight rate and won’t move on the back of it.  Italian and Spanish bonds yield far more than the overnight rate because of real credit and currency conversion risk.  Spanish and Italian bond yields may improve on the announcement but it will be because of the “symbolism” of the cut and the ECB’s willingness to be aggressive.

The cut would also affect all the LTRO debt outstanding.  Again, this is marginally better for banks as the weakest ones, that have relied on LTRO would see a funding reduction.  Over time, this would become meaningful given the size of LTRO, but as we have seen time and again, carry takes time to work its magic and mark to market will play a far more significant role in the near term.

An ECB rate cut would be only slightly more useful from a practical sense than a renewed commitment to global swap lines, but combined they would send an indication that central banks are on top of the situation and should support risk assets.


The ECB could announce some new form of LTRO.  They eased the collateral requirements on the last LTRO at one of these regularly scheduled meetings.  If they are planning LTRO or something similar, this would be the day to do it.  For any new LTRO to have meaningful impact for the market it probably needs to be at least 5 years in maturity.  There is still enough unused LTRO money outstanding that just 3 years won’t excite the market much, but extending to 5 years could create some interest.  If the ECB announces a new LTRO, look for them to emphasize that they will take corporate loans, EFSF bonds, and ESM bonds as collateral.  If they do LTRO, they have to demonstrate it isn’t just so banks buy more of their own sovereign debt, but so that they can continue to lend to corporations or to load up on “safer” EFSF, EIB, and ESM bonds.

I think it is 50/50 whether get some new LTRO announcement.  Without one, the support for risk assets will decrease.  If we get one, and it has a longer maturity than existing ones, and the message is that banks can use it to fund things other than straight sovereign debt, it would be well received.

Pan-European Deposit Insurance

This could come up at the meeting.  The ECB is clearly in favor of something like this and is likely to say positive things about the possibility but be careful.  A program like this would take time to enact.  This would be one of those cases where the bank would be saying what the market wants to hear, but limited probability of it ever occurring.  Last year the markets would have responded well to a plan to plan a plan for an insurance plan.  This year the market is likely to shrug off anything that doesn’t seem like a concrete proposal.  This is especially true now that currency devaluation risk has been added to the solvency and liquidity mix.

China Stimulus

Data out of China continues to be weak, not just by their standards, but in some cases, just plain weak.  China seems the country most willing to make decisions away from scheduled meetings so they have the most flexibility in announcing something in conjunction with other central banks as early as this Wednesday.  With commodity prices dropping like a stone, with the Baltic Dry index down almost 25% in less than a month, China has room to act.  China, more than any other country, is in the position to actually provide real stimulus along with monetary stimulus.  It certainly seems that China could use a dose of stimulus and that they can afford it and that they would be least sensitive to launching a program on a specific day.  If they get comfort that other central banks will act, it wouldn’t surprise me to see them act first and aggressively.  It would put pressure on commodity prices, which no one really wants to see, but would be very supportive for risk assets.  I expect we get something out of China, though it take a bit longer than the 6th of June.

Global QE

I fully expect the Fed, BOJ, and BOE to take aggressive stances and to announce either new QE programs, or to publicly recommit to existing ones.  Too often the central banks have waited until the markets are in true crisis mode to act.  When that happens, their policies do help the markets but do little for the economy.  Acting sooner may allow some of their policy actions to actually trickle into the real economy.  Bernanke probably faces the most opposition to another round of QE, but frankly he doesn’t seem to care.  He “wrote the book” on what to do, and since it is his book he will follow what it says – as much money as fast as possible.

I expect the June 20th meeting to be the official launch of a new mortgage based QE program that creates new money (rather than being sterilized ala operation twist).  There is no need to launch it on the 6th, but he will signal his support with swap lines and then follow up with very dovish testimony on the 7th.

Bank Recapitalizations

The ECB can only do so much on this front.  This will require additional EU policy makers, but the ECB can highlight that this is the priority it should be.  If Europe has any hope of turning the corner (or at least mitigating the damage) they have to get serious about finally getting bank recapitalizations done.   They can no longer worry about the dilution for existing shareholders in weak banks.  This has to be a priority.  I don’t think the ECB has much real authority in this, but look for comments that point to progress and high prioritization on this front.  If there signs that no progress is being made on this front, that is very bad, no matter what other policies they put in place.

Project Bonds

If the EIB is going to go down this path, it might as well announce some deals now.  These will eventually get issued so might as well do it now.  The size of the projects won’t be enough to change anything in Europe but once again the “feel good” factor will be high and it will encourage all of those who are championing European “growth”.  Although they won’t be game changers, they are easy enough to push through and the “morale” benefit would be best if some started to get issued in conjunction with other policy initiatives.  The “shock and awe” theory.

EFSF Intervention in Primary and Secondary Markets

The EFSF and ultimately the ESM are supposed to assume these roles from the ECB.  It would not surprise me to hear that the ECB is ready to perform their role as agent on behalf of the EFSF for these purposes.  Bond markets are so thin, that just the hint of renewed intervention in the secondary market, could cause Spanish and Italian bond prices to gap higher.  This would affect the long end of the curve more than the short end since this would be more of a short covering rally than any real belief that the EFSF has the firepower to buy too much debt.  The threat to intervene in the primary market is just that, a threat.  The EFSF, as currently structured cannot get big enough to be meaningful.  The ESM, especially with a bank license, could get big enough.

ESM as A Bank

I think the ECB will mention that they will take ESM debt as collateral, but don’t think they will be able to give it a bank license at this stage.  Germany has been opposed to that.  Germany cannot stop the ECB from taking ESM bonds as collateral and providing banks with a lot of leverage, but they can stop the ESM from becoming a bank in its own right.  Any sign that ESM will be getting a bank license would be a big deal.


If this is all they come up with, run.  EuroBonds are a long way from being reality.  The countries all have such divergent policies it would take years to create true EuroBonds if the economies were doing well, let alone when they are struggling.  Germany is opposed and should be.  Not only are they not going to get done anytime soon, I haven’t actually seen a credible plan of how to implement them without causing disruptions in this market.  The dispersion between the different economies makes any form of implementation almost impossible.  If the ECB takes a lot of other actions, then take some infinitesimal comfort from talk about Eurobonds.  If the ECB does nothing but announce plans to work on EuroBonds, be extremely afraid.

Troika Debt Restructuring

Far less likely, but still a possibility is some form of announcement that the Troika is renegotiating their existing debt to reduce coupons or extend maturities.  I don’t see this getting done yet, but possibly after the Greek elections, something along these lines could be announced.  Whether countries are running primary deficits or not, a reduction in current interest expenses would be meaningful.  I don’t see this happening now, but is worth keeping an eye on.

How to Play It

Look for action on the 6th.  Be extremely disappointed if nothing happens and expect markets to decline rapidly.  If central bankers do take some policy actions, it is key to figure out which ones are practical, which are merely symbolic, and which are just a dream and not an action.  Who says what is just as important in some cases as what they say.  When Merkel says something, we all need to listen.  When anyone from the EU in Brussels says something, it will be the same thing they have said over and over and is completely self-serving and should be ignored.  Anything Draghi and Bernanke might say is critical to listen to, because in this weird world, they have the most power to do something meaningful in a short period of time.

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Long-John-Silver's picture

It's hard to kick a can that been run over and is now flat as a pancake.

JackT's picture's time for a new can.  Anyone have a can of soup?



Raynja's picture

In wsj, Hilsenrath expose on cleveland fed pres ms.' the middle dick is the right dick' pianalto, makes it sound like we have reached the line in the sand got printing money.

Short Memories's picture

Yawn! Get on with it! Mondays are bad enough...

BeetleBailey's picture

...and bringing road paving equipment to make more road to kick the damn can down it....

slaughterer's picture

I thought the Bernanke was tethering all the world's cans to his helicopter.  Forget kicking, we got cans flying hooked up to the "Bernbankecopter" (TM, rights to Hasbro for sale on retail markets this Christmas). 

duo's picture

The Bernank has to see $2.60 (hopefully $2.50) on RBOB NYMEX futures.  That would give a $2 handle in some states for gasoline, then he announces QE3.  It also means a $5 loaf of bread by Christmas, but he has to prop up the stock market to save the pension system and Obama's job.

asteroids's picture

The market will probably crash this week. After all, the European Soccer Cup starts this week. That is FAR more important than the markets and traders will be focused on that. They would really be pissed if they were distracted by anything else.

Long-John-Silver's picture

This is like planning for the landing at the bottom of a cliff you have already gone over.

SheepDog-One's picture

Try to throw piles of free money down there to land on!

Everybodys All American's picture

Plan on being disappointed.

Sean7k's picture

This is STUPID. You cannot create wealth out of debt. 

This is a solid analysis, but ultimately, who cares?

Printing money and bonds do not a recovery make. Production makes a recovery. Production needs capital. There is zero capital, because it is being thrown down the deflationary black hole as fast as it can be created. This is simple economics.

Consequently, we are living the charade of monetarism and fascism. When will the majortity of the people finally figure out that their wealth is being transferred? That their wages are falling incrementally? That their entitlements are being stripped? That their living costs are rising and paying for crap of little to no value? That they are slaves with velvet chains.

Those intelligent and educated enough see the grand plan, they can fend off the bank's minions, but who wants to be wealthy in a world of zombie apocalypse? All the money in the world will build you a high fence, but it better be pretty nice inside, because you're never going outside of it.

smb12321's picture

It's like folks in the burning sun trying to think of a way to stay cool - more clothes, fix a shelter, have a drink - and avoiding the obvious - get out of the damn sun!  I agree 100%.  The talking heads are always full of answers but no real solutions.  Until they face the fact that the welfare state in Europe is just not sustainable with declining populations and accelerating retirees (not to mention a short work week, wacky labor rules, etc ) nothing will be done.

After a while it all runs together - EU, ECB, ESM, EFSF, LTRO, pan Europe controls, bonds,rules...H E L P !!

westboundnup's picture

Kicking the can works if everyone is on board.  The collapse will likely pick up speed when one country realizes that it can benefit more by checking out rather than going along.

ghostzapper's picture

Ya, and announcing several new or expansions of existing bailouts won't signal they are in complete panic mode now will it? 


Oh I get it, when the Spider might go red for the year it is a requirement that central banks go "all in" to save ES. 

smb12321's picture

What's so annoying in this analysis/rehash is that not one of these "solutions" (lol) addresses the problem of too much damn debt, too few births, too many retirees not ot mention the mathematical impossibility of maintaining a welfare state with these elements.  It is all such phony window dressing that is so reminiscent of US policy under Obama - try this, no that, reduced this, temporary boost, lower rates, help this group, no that group,blah blah blah blah blah blah

ElvisDog's picture

What the Euros don't have yet that Obama relies on almost entirely these days is a whipping boy to blame all the lack of economic performance on. They need a "do nothing Republican Congress" or "clouds from Europe".

Sandmann's picture

Pan-European Deposit Insurance


really ?  Just how will you insure Bank Deposits on a Continent where Bank Deposits EXCEED GDP ?

This is you think they Inhale, Imbibe, Ingest, or Immerse themselves in these hallucinogenics to dream up such weird ideas ?

Bubbles and Busts's picture

There will definitely be more attempts at tape-bombing this week, as already seen this morning with markets now well off the lows. While the US remains overly optimistic about stocks and a US of Europe, Europe's stock markets may have already priced in a significant amount of the bad news. Austerity is not really happening in most of Europe so there may be room to run on positive, though ultimately false announcements. Is Non-Existent Austerity Priced in to Euro Stoxx?

adr's picture

The plan is kick the can till the boomers are dead. Then leave the zombie infested apocolypse for the kids. THANKS MOM AND DAD!!!!

Jews used to be shop owners, bakers, and business owners. Then it became, meet my son the banker, meet my son the doctor, meet my sone the lawyer. And the world died.

Once the path to wealth became confiscation rather than production we were all fucked.

billybobtx's picture

When Merkel says something, we all need to listen.


Ok, she just let out a huge queef...Bullish?

Confundido's picture

The Pan-European Deposit insurance will not work, because the Germans know that the Bunds will suffer massively with it....unless.....unless the ECB buys Bunds....that could be an effective can kicking excercise.  Someone wrote about this on May 29th:

CreativeDestructor's picture

This guy is smoking panic weed,

Sandmann's picture

Take these facts - on a Land area 44% USA Europe has a 60% bigger population speaking 23 languages and with population density of 115 vs 31 in the USA.

It has a GDP 12% higher than the USA with 500 million people meaning it has 66%  US GDP per capita

Bank Assets as %GDP  USA 78%   EU 349%

Bank Deposits to GDP    USA  59%   EU  139%

Bank Loans to GDP       USA 45%   EU  144%

wonderatitall's picture

dont worry barry will save us. the party of the rich ie, democrats will give millions to barry and his banker buds and the world for them will be saved......welfare and foodstamps the greatest economic policy ever thought up by a guy who never had a job

LawsofPhysics's picture

LMFAO!!!  Still think that there is a "party" that represents you?  Another sheep that can't see that there is only one party, for the banks and financial houses, by the banks and financial houses.  FAIL.

ElvisDog's picture

I wish we had a Tsiparas-like candidate in the U.S. - young, charismatic, willing to sort-of speak on the reality of the situation, not so obviously captured by big-banks, big-oil, big-pharma, big-Ag, etc.

css1971's picture



You think he isn't owned? You dont get to the top without being owned.

ElvisDog's picture

Well, he probably is owned by someone, but the other candidates are 100% guarenteed owned by the troika, just as Barry and Mittens are 100% owned by big money here in the U.S. But at least there is some small chance that Tsiparas might act somewhat independently.

hedgehog9999's picture

how many D days can you have, every week end Sunday night is a D day!!!

gwar5's picture

Yes, June 6th is D-Day again. And December 21, 2012 is still the Mayan Doomsday, unless it's called due to rain.

LawsofPhysics's picture

Nothing changes until the bad debt is purged from the balance sheets, period.  Ultimately, that would require the 0.001 % not recieving their pound of flesh (read interest on the debt or "money for nothing").  Now what are the chances of that happening?  These people have been growing richer and richer on interest alone while creating nothing of real value themselves.  Collecting interest is "work" you know.  LMFAO!!  This has been going on for centuries.  History shows how this turns out, hedge accordingly.

I see the business school graduate student pussies are on line again.  junks but no rebuttal, they know they are fucking morons.  Investment and growth has to come from savers and productive labor as there is a very real cost for creating capital, especially if you don't create anything of real fucking value as a result - PAYING INTEREST WITH MORE DEBT IS A DEATH SENTENCE YOU FUCKING MORONS!!!

How did we get here?  Simple, no real consequences for bad behavior, especially in the financial sector.  Where is John Corzine mother fuckers?

ElvisDog's picture

The 0.1% survive by feasting on the wealth of the bottom 99%. The poor, the bottom 60% has no more wealth left. You can load them up with a little more debt, but they're basically done. The middle class is currently being sucked dry. I make an income that is in the top 5%, don't live an extravagant lifestyle by any means (I drive a 17 year-old car), and yet every month I basically spend everything I earn. I can only imagine what is happening to the people in the 60-80% income range. Point is when the cow has been sucked dry, the mosquitos die too. When the middle class is finally crushed to near extinction, the banking class will fall too.

Element's picture

" ... we're gonna need a bigger war."

ElvisDog's picture

"We're going to need more FBI-guys"

"Yippee Ki Yo, Mother Fucker"

Element's picture

hmmm ... this should be interesting, just popped up on RT:



Tanks, militia encircle Tripoli airport

Published: 04 June, 2012, 17:25

A Libyan militia has encircled Tripoli’s international airport, forcing flights to be rerouted to a nearby military airport, a security official reports. Tanks have been deployed to the airport as the standoff remains tense.

EZYJET PILOT's picture

I'm sick of reading this sort of stuff, it's so pro finance, here's a classic example "Too often the central banks have waited until the markets are in true crisis mode to act.  When that happens, their policies do help the markets but do little for the economy.  Acting sooner may allow some of their policy actions to actually trickle into the real economy." Does he actually believe this? Their actions were never designed to trickle to the real economy, how the hell is acting slightly in advance going to do anything, when the stock market drops the average Joe doesn't care,  just the financiars. What the hell difference does it make where the stock market is when Bernanke acts? The people in the real economy don't have jobs, does QE provide jobs? No thought not! This shit is really starting to get to me, I'm sick to death of f@cking educated idiots.

brooklynlou's picture

Read the laundry list of things they need to do to avoid torching the Euro. Really read it. This crew take three months to decide whats for lunch and the expectation is that they're going to become suddenly decisive? Good luck with that ...

Element's picture

Or maybe this one? ... yeah, this looks like it, and fresh off the presses ... this should be a cracker war;


‘West won’t back down in Syria, Russia and China must be firmer’

Published: 04 June, 2012, 03:37

Edited: 04 June, 2012, 09:58
Neil Clark, a contributor to Britain's Guardian newspaper, says Western states are using the recent tragedy in Houla as a pretext for a possible intervention – as they did in 1999 in Yugoslavia and in 2011 in Libya.

­Russia warns that the UN Human Rights Council’s resolution condemning the Syrian leadership for last week's Houla massacre risks derailing the peace plan. Moscow called it premature because the investigation is ongoing, and said the resolution is putting pressure on the Security Council, where Russia is resisting foreign military action.

On Sunday, President Assad insisted his troops had nothing to do with the slaughter of more than 100 people in the city. He blamed armed rebel gangs for the attack and outside forces for instigating the conflict to trigger intervention.

Washington, which backs the Syrian opposition, admits there are plans for military action.

RT: Moscow says there are attempts by several countries to use the Houla tragedy to further their own interests and undermine Kofi Annan's peace plan. What do you think about that statement?

Neil Clark: I think it is absolutely correct. I think what we have got here on the agenda is pretty obvious. For the last 15 months there’s been an attempt by Western powers, backed by Arab Gulf states, to topple the regime in Damascus.

And this reminds me – and I’m sure it reminds a lot of people too about what happened back in the late 1990s in Yugoslavia – a situation where the Milosevic government there was under enormous pressure as well. What we had then was Western forces backing rebels against that regime. We had so-called massacres taking place which were then used as a pretext for military intervention, which has caused what we’ve got in a NATO bombardment in Yugoslavia.

And 12 months ago we had exactly the same thing again with Libya. We had atrocity stories come out of Libya. America and Britain were at the forefront of saying “look, we’ve got to intervene” – which is what happened in the end of course. And so, it’s déjà vu, it’s like 1999 and 2011 all over again.

RT: So, where from here? Have any lessons been learnt? I mean, Syria's opposition is urging military action and Washington's voicing its readiness to act. Where do you see these calls for foreign intervention heading?

NC: I think we are reaching a crucial point of the whole affair now, and I think that Russia has made it quite clear that it won’t support military intervention. They were kind of duped over Libya, and they are not going to be duped again. The only way we can have a peaceful solution to this is if the Western powers and countries like Qatar and Saudi Arabia say to the rebels “look, stop,” and stop supplying them with arms.

But unfortunately the stakes are so high here, because what happens in Syria is of enormous global importance, because the West wants this regime to go. They want a pro-Western regime that will come in, that will be more pro-Israel, that will be anti-Iranian, and that would prepare the way for an attack on Iran. So the stakes are incredibly high here. And unfortunately I don’t see the West backing down here. I think, unfortunately, we are going to get more and more aggressive behavior from the West, more and more backing the rebels.

And I’d like to see Russia and China come out now and really take an even firmer line on this and say “Look, stop this!”

There is a political process in Syria, there is a new constitution, we had an election in Syria, there is a democratic path. And I’d like to see Russia and China really say to the West “Stop, stop, stop your behavior!”

RT: You said this is reaching its crunch point. The opposition wants the UN envoy to admit his plan has failed. Is that likely to happen?

NC: Let’s face it, the US, Britain, France, Saudi Arabia and Qatar do not want Kofi Annan’s plan to succeed. It’s the Syrian government that wants it to succeed – and Russia and China.

I think it was on Friday that the Qatari prime minister said that Kofi Annan should put an absolute deadline for his plan to work. It’s not helpful. I mean, why is the plan not working so far in bringing peace? Because the rebels are still fighting, they are still using arms, terrorist attacks are taking place in Syria. And what is the Syrian government supposed to do in response?

It now seems evidence is coming out of Houla that, you know, last week it was the Syrian government, now the evidence is not so clear. President Assad today in Damascus denied any involvement in that he said it was a “horrific, ugly crime.” So, you know, it’s up really to the people who are backing the violent rebels to rein them in.

RT: The violence is spreading beyond Syria into neighboring Lebanon. What are the wider consequences if this gets worse?

NC: Well, we could be heading towards a major Middle Eastern war unless the West changes its policy. You know, the West is playing a very dangerous game here. Syria was a country at peace 15-16 months ago. There were peaceful protests. We’ve got democratic reform in Syria. So there’s no real need for people to be using violence. And what the West is doing is criminal. What the West and Saudi Arabia and Qatar and other countries were edging to, and Israel too has been supporting regime change, what these countries are doing is criminal because we could have a major world war happening here.

RT: Why do you think a significant body like the UN Human Rights Council has already apportioned blame before the results of the international probe?

NC: I think this is due to Western pressure, because if you think back seven days ago, right from the very first time we heard about this massacre, the lie from the US and Britain was the Syrian government was responsible – before any evidence had appeared. And I’m afraid that there’s been a lot of pressure put on the UNHRC this week. And that is behind that statement which is not very helpful at all.

Push for military intervention ‘enormous’

­There is growing rhetoric from the international community pushing for military intervention in Syria. John Laughland from Paris-based think tank The Institute of Democracy and Cooperation, told RT that the push for military interference was “enormous, with France and the US leading the race.”

“Of course it’s used as a pretext to start intervention,” said Laughland. He added that the West is repeating its condemnation of the Assad regime “obsessively, so that eventually everybody will take it for truth.”

Speaking to RT, historian and author Nebojsa Malic again cited the example of the international community’s intervention in Serbia in 1999. He said that US condemnation of the Houla Massacre in Syria just over a week ago was a precursor to military intervention.

“Interestingly enough Syrian rebels have been mentioning they are learning democracy from the Kosovo Liberation Army, while it’s obvious the only thing these guys can teach is how to use massacre to start war. And this is exactly what’s happening,” stressed Malic.




"We come in peace!" - Barry and Hills


Seriously, these two need to be tried and then executed - I'm being absolutely serious saying that. 

Now is the time when the entire world, especially in the United States and Europe, need to say with one politically deafening voice;

N O !

Debeachesand Jerseyshores's picture

Long "smoke and Mirrors"