Karlsruhe Decision: German Taxpayer Pillage Can Continue (But With EUR190bn Cap)

Tyler Durden's picture

UPDATE: EURUSD unsure - but seems like 'Unlimited' ECB Bazooka's trigger (ESM) is now capped at EUR190bn from Germany.

The Kardinals of Karlsuhe kame through. As somewhat expected, they declined the complaint that, simply put - and among many other things, the ESM structure (i.e. German payments into it) stretches German constitutionality and can proceed to a broader vote next year - but basically - in a nutshell - there's no coming back now. As expected there are conditions though - that the market seems perturbed by:

  • *GERMAN COURT ALLOWS ESM RATIFICATION WITH CONDITIONS :13347Z US
  • *GERMANY MUST SET CAP FOR LIABILITY UNDER ESM WEHEN RATIFYING
  • *GERMANY MUST MAKE SURE ITS ESM SHARE IS CAPPED AT EU190 BLN

Limited ESM (primary market) vs Unlimited secondary bond market buying (OMT). Go figure it out

 

Pre-Karlsruhe: EUR 1.2870, Spain 10Y 5.677%, ES 1434, 10Y TSY 1.7100%, 10Y Bund 1.5700%, BE500 (Stocks) 187.13 (as the decision was made EURUSD cracked 60 pips lower and back up - perfectly normal algo stop-run)

Post-Decision (positive reaction): EUR 1.2895 (+25pips), Spain 10Y 5.70% (+3bps), 10Y TSY 1.732% (+2bps), 10Y Bund 1.614% (+4bps),  BE500 (stocks) 187.7 (+.57)