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LTRO Stigma Reaches All-Time High
Six weeks ago when we first brought the idea of a 'stigma' for accepting LTRO loans, the difference between credit spreads of unencumbered banks and encumbered banks was a mere 50bps. Today it has soared higher to post-LTRO record wides at 100bps as LTRO-facing increasingly-encumbered and increasingly-subordinated senior unsecured credit spreads blow out to near mid-February wides. It was mid-February when we called out Draghi for lying about the 'stigma' - perhaps now the market is realizing he was not telling the truth, the whole truth, and nothing but the truth as all the benefits of the LTRO (fixing short-term liquidity issues for the critical banking system) start to unwind. Whether it is margin calls from the ECB on falling asset prices or rising cost of funds from a market-wide recognition of the massive subordination that just occurred (and will only get worse), we suspect the primary issuance market for EU banks (especially those who took the loans) will be closed (or hugely expensive) for a long time to come.
Charts: Bloomberg
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~Can you hear me Major Tom? ~Can you hear me Major Tom?
You mean your in control?
Theres something wrong....
"A democracy cannot exist as a permanent form of government.
It can only exist until the voters discover that they can vote themselves largesse
from the public treasury. From that moment on, the majority always votes
for the candidates promising the most benefits from the public treasury
with the result that a democracy always collapses over loose fiscal
policy, always followed by a dictatorship."
-Alexis, (Major Tom) de Tocqueville
Can You hear me Major Tom??
How about "it can only exist as long a corporate interests don't infiltrate it at every level, tilting the playing field to their advantage in every arena".
Mr Tocqueville was only partly right.
everyone knows the dice are loaded. - http://hedge.ly/GIAJwV
Someone please tell them the iBlackBarry has already been mass marketed.
the Bernank is backstopping them nothing to worry about, BTFD!!!
Draghi thought he was telling the truth but was too stupid to realize how wrong he was.
off-topic, but it appear trading in Apple has been halted due to a "bad trade" making it drop to 542$, a 9% drop
mini-flash-crash?
and so it begins...
Bad trade! BAD! Someone get me a rolled up newspaper!
Bloomberg said bad trade of 100 shares caused the 9% instant drop - smells like HFT
trading resumed as if nothing happened
Someone needs to text the PPT and get NASDAPPL backfilled quickly.
That's the type of drop, whether caused by free market forces or not, that can destroy a central planning, fractional reserve bankster's best laid plans (aka worst policy ever).
Israel central bank is gonna be PISSED now!
Yeah they already "corrected it" AAPL back up to $597. Is the market ever going to correct? I mean don't they want it to correct for QE3 or are things so far gone they don't even care about public opinion and political currency anymore and will just open the spigot on a whim without a justification? VIX at 3 year lows...pretty amazing considering all I read is doom, chaos and everything unraveling. Maybe they CAN keep this going indefinitely...
Yea, but the ECB can buy the stigma bank debt and retire it at par. They really should open a hedge fund! :)
LTR0 Banks
Let Them Reach Zero
I feel stigmatized!
I heard Bernank plans to fix all this with a lecture tour to European school kids about how great the central banks are.
Only after an advance security team removes pointy objects, like pencils and pens, from their desks.
Anyone that hasnt figured out that the whole paper market is nothing but a confidence scam, will at some point feel very foolish and very broke.
The Wile E. Coyote scenario continues...
SPX daily chart with rising wedge enclosed by substantial megaphone pattern.
http://stks.co/31QM