In The Meantime Belgium Bond Yields Jump, ECB "Flight To Safety" Facility Usage Soars To Highest In 15 Months

We would point out that USD Libor is wider again this morning but at this point it is irrelevant: for a multi-billion core European bank to go insolvent "overnight" (nobody could have foreseen it and all that), and with Libor to still be trading under 1%, and specifically, under the USD FX swap line penalty rate, it means that the BBA market is either completely broken or criminally corrupt and colluded. Take your pick. So instead we will focus on what actually does matter in the market, such as the fact that ever more banks are exhibiting the fear and loathing discussed earlier this weekend, with an unprecedented scramble to dump every last eurocent in the "safety" of the ECB's clutches: as of Friday, a whopping €255.6 billion ($345 billion) in cash stood idle, and hence as far away as possibl;e from normal interbank liquidity, parked with the ECB: the highest since June 30, 2010. Expect this number to jump even more tomorrow when the Monday, aka "post-Dexia" number is released. And elsewhere, as expected, Belgium sovereign bonds are already starting to take on ever more water, as Belgium and France 10 year notes fall and the French 10 yield hits highest in over a month. Belgium and France govt bonds will be pressured as fallout from Dexia highlights risks and costs to state from banks’ exposure to peripheral debt, Padhraic Garvey, strategist at ING, writes in note. Specifically, the Belgium 10 Year yield is at +7bps to 4.05% while the 2-yr yield +4bps to 2.34%. At least the curve is not massively inverting just yet. In France, the 10 Year yield is +7bps to 2.83%, the highest since Sept. 2. The spread widening in these two countries will not stop as an imminent rating agency downgrade overhang is now a threat to bondholders of both countries. Said otherwise, the Dexia-Belgium CDS compression trade is alive and profitable.

ECB Deposit Facility usage:

Comments

[Gandalf6900]

Implosion bitchez

[Mike2756]

Naah, all is well, the Euro sez so.

[The Reich]

when will this all end? soon i hope, its all one big joke

[Azannoth]

http://www.youtube.com/watch?v=qSo-0LsXFKc

scroll to 1.25 :) .. in the end he says "it's all a big fuking joke." but the clip cuts short

Now substitute The Comedian for Ben Bernake, Blankfine or Trichet, and Moloch for Sarkozy ROFL :)))

[GeneMarchbanks]

Backstop until sovereign collapse, questions?

[Gandalf6900]

it won't end til the fat lady (merkel) sings

[AUD]

Stood idle?

I think not. What is the ECB using to prop up the government bond markets of its constituent members?

[Cassandra Syndrome]

Bloomjerk says no recession for the US, please get back to your gulags and stop yapping.

[Fips_OnTheSpot]

why is US bond trading "down"?

[Schmuck Raker]

One small pocket of sanity?

[Schmuck Raker]

"I think we're going to need a bigger chart."

[Dick Darlington]

And what did S&P do with regards to Belgium? They've had Belgium on review for dg since last december. Now that the Dexia "news" blasted on Belgiums face, S&P jumped to maintain their rating as it is. LOL!

[Josephine29]

I enjoyed the bank collapse time line that I read below.

Time line of a bank collapse

1. The Board issues a statement accusing bloggers of spreading both irresponsible and factually incorrect rumours as the bank is sound and has no need of new capital.

2. The Bank issues a statement of confidence in its management.

3. The Bank tries to raise more private capital in spite of it having no need for it.

4. If this does not work the relevant government(s) express(es) complete confidence in the bank and tell us that it has a sound management structure and business model. Indeed the bank had only recently been giving the government advice as to how to run the public-sector more efficiently.

5. The relevant government(s) tell us that they are stepping in to help the bank but the problems are both minor and short-term and are of no public concern.

6. The relevant government(s) tell us that the bank needs taxpayer support but through clever use of special purpose vehicles there will be no cost and indeed a profit is virtually certain

The later stages which go up to point 13 are to be found at the link below.

http://www.mindfulmoney.co.uk/wp/shaun-richards/belgium-and-dexia-are-now-trapped-in-an-unholy-embrace-where-the-biggest-loser-will-be-taxpayers/

[Dapper Dan]

Josephine,  thanks for the link

 I love # 11 from the list.

11. It is announced that due to difficult financial times public spending needs to be trimmed and taxes such as Value Added Tax need to be raised. It is also announced that nobody could possibly have forseen this and that nobody is to blame apart from some irresponsible rumour mongers who are the equivalent of terrorists. A new law is mooted to help stop such financial terrorism from ever happening again

[Dapper Dan]

If anyone is wondering what the Nobel economic prize winner Christopher Sims is doing with his share of the prize.  

By KARL RITTER and MALIN RISING
Associated Press

Asked how he would invest his half of the 10 million kronor ($1.5 million) award given the turbulence of today's financial markets, Sims said: "First thing I'm gonna do is keep it in cash for a while and think."

I assume Sims ment to say "convert the kronor into US cash" 

Although,  saying I won 10 million as apposed to saying I won 1.5 million may have It's advantages.

Sims developed a method based on so-called "vector autoregression" to analyze how the economy is affected by temporary changes in economic policy and other factors, like an increase in the interest rate, the academy said.