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LTRO Stigma Becomes Acute Days Ahead Of Second Operation
As we pointed out on Friday, there is a clear stigma being priced into LTRO-encumbered European banks relative to non-LTRO-encumbered (due to many aspects but most notably the implicit subordination of senior unsecured debt via collateralized loans to the ECB). Today that stigma, proving as we said that Draghi is simply incorrect, continues to grow as there is a dramatic preference for non-LTRO names in today's modest post-Greece's gun-to-my-head decision relative to a very modest improvement in LTRO-accepting names. As this performance gap increases we suspect it increases the probability that LTRO II will be a disappointment in terms of size and the implicit derisking that could encourage.
Credit spread of non-LTRO-encumbered banks (green) has rallied (tightened) today in the risk rally while after both leaking wider most of last week, LTRO-encumbered banks (red) have rallied very little. The growing divergence raises red flags all over the place as we suspect the red LTRO banks will be increasingly stuck as capital markets will remain shut to them therefore forcing them to borrow more from the already addicted-to LTRO in order to maintain liquidity but will implicity be damaging their solvency.
Chart: Bloomberg
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Greece Mar 12 bonds getting higher and higher. Huge LTRO or not, someone's buying.
The higher it goes, the sooner it all goes to zero.
Greece is saved, crisis over. LTRO will be the finishing touch: markets will rally. #WhatCollapse?
Short ban on French banks is lifted.
haha, I guess Tyler, this site, and whoever keep putting their heads in the sand are totally screwed. These guys are in such a denial (with their pocket shrinking betting against the market) that they are no different from Al Gore and his "man-bear-pig" thing.
cheeeeeeeeeeeeeers!
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I have a great idea! Make everyone participate in LTRO, that way no one will be able to discriminate against the incompetent bankers. That wouldn't be fair to make someone be responsible for their own mistakes.
but, but but, thats mixing wheat and chaff, spells bad for coming harvest! Even if it makes the amount look bigger. Toxicity is the killer here. And proximity makes it contagious.
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.
This above all: to thine own self be true,
And it must follow, as the night the day,
Thou canst not then be false to any man.
This is a possible "solution". The FED forced bailouts down everyones thoat a few years ago. It wouldn't surprise me if the ECB does the same. This means more euros are created which means that the Euro loses.
A real solution - The ECB has to make the LTRO recipients buy gold with the money, and then the ECB buys the gold back from the banks at an inflated price, making them solvent. Once the ECB has enough gold, the EU switches to a gold standard at say 10000 Euros/oz.
wishful thinking - good, nevertheless wishful -
no gold backing as long as King Dollar rules
Well, maybe Tyler Durden is right this time. Or not. Lol.
I would like to participate. Give me some of that dough. I will give it back I swear. I just have to go to a store and then for a boat ride.
The market is not stupid, I think is the lesson here.
The market was doing this in 2008.
Sticky fingers, for those who stretch their hands out to receive handouts; but beggars can't be keepers of the seal and guardians of the treasure. So goes the banking Ivy league mantra.
The banks that are not beggars will scream that those on the other side be ostracised; before the Ostrogoths arrive at the gates, as there isn't enough lolly for all the bank dollies. Some have to be junked from Central Bank park, like in "Panic at Needle park"!
I can see you don't like LTRO and LTRO2 giving a free lunch of €120 billion to banks. Banksters not taking a free lunch, sounds incredibly improbable to me:
Bloomberg sees it that way:
http://www.bloomberg.com/news/2012-02-13/draghi-158b-free-lunch-boosts-bank-profits.html
"Stigma" or forgoing €120 billion free profits? Kind of easy to choose, I think!
Would be also interesting to see the definition (list of banks) of "non-LTRO participating banks" and also "LTRO participating banks"? Does that include also banks who cannot access LTRO such as Japanese and American banks?
Do you include every bank in the world outside of the Eurozone in the former?
Remember, LTRO is only for Eurozone banks or non-Eurozone banks that have full operations in an Eurozone country whose Central Bank approves of the LTRO use.
Is the greek bailout package contingent of the psi deal getting done?
what "stigma"?
it's against the rules to short these stocks, or did they "fix that better" too, for "now"?
these fuking zombies need new undies or they won't be able to promenade in Paris4Easter
bfd imo
Irrelevant. widening of senior unsecured spreads only make participation in LTRO more attractive since banks will be using this second round to retire their own debt at a discount, recognize an immediate capital gain and help boost their own capital ratio in the process. (per Draghi at the last press conference). who cares about the stigma? banks aren't issuing senior unsecured credit anyway... last year all their issues came through covered bonds. If enough banks draw on the LTRO and retire their own debt, then the ECB gets backed into a corner and will be running LTRO's in perpetuity to support the system. I say the 2nd 3-yr facility will draw a HUGE allotment. I guess we'll see soon enough.
Short Ban on French and Belgium shares lifted today. Thats how simple it is. E.g. Soc Gen down 9% to day (after going up 70% since recent low)
Tyler is on thin ice as soon he start to talk about ECB/FED and LTRO/QE. He need to grove up and just accept "don't fight the FED/ECB". He completely messes up what he believe with the market will. Tough pill to swallow.
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Give it a bit of time. It took a few months after QE2 for the liquidity to dry up. LTRO2 will be the same. Just in time for Spain and Italy to come on deck. It's going to be a hot summer. LGBT Community
Expectations about the size of the LTRO participation have been scaled down in recent weeks, and because the size is entirely determined by bank preferences rather than the ECB, it reveals nothing about the policy outlook for the euro zone. Brain training
Damn market fundamentals throwing a wrench into the works. Why can't people simply accept that short sighted, self serving central planners know everything and just fall in line? Food product | Rice flour | Modified starch | Soya Bean | corn starch | Tapioca starch