Snap Reactions To Italy's €5 Billion Bill Auction, Which Reeks Of Illegal ECB Intervention

Tyler Durden's picture

Earlier today Italy sold €5 billion in 1 year Bills at an average yield of 6.087%, the highest since September 1997, and almost 3% higher compared to a month ago, when it prices at 3.570%. Yet there was a stunning twist: the 1 Year was trading at a whopping 7.75% in the gray market minutes before the auction, or almost 200 bps wide of the auction result, something which never happens under normal conditions unless the invisible hand of the central bank has anything to say about it. Now we know already that the ECB stepped in to aggressively mop up Italian bonds in the secondary market immediately after the auction to bring 10 year yields below 7%, however briefly: the bond has since widened above that level once again. Yet what is shocking is the primary market strength for the 1 year: since the ECB is prohibited by law from intervening in the primary, auction market, we wonder just what illegal backdoor funding scheme the ECB has concocted with friendly banks in order to have the auction price where it did, and how much money was transferred by back door channels to keep Europe from imploding one more day. Considering that the EURUSD was trading below 1.35 just prior to the auction at around 3 am, and has since regained losses, just as we expected yesterday, please remind us to add this latest illegal central bank intervention feature to the list of things to uncover once Europe blows up and the ECB's secret trading records are laid out for all to see. In the meantime, here is the Wall Street snap reaction to the Bill auction.

From Reuters:


"This represents the highest such yield since September 1997 and although favourable relative to that of the Oct. 12s, which had briefly broken through 8.0 percent in the secondary market this morning, certainly does nothing to dispel the concern that Italy's debt costs have moved firmly into unsustainable territory."


"It's certainly gone a lot better than the secondary market levels were tending to indicate, but the spreads are so wide that you always have to take secondary market indications with a pinch of salt. It is better than expected but still not sustainable. There will be some relief that it hasn't printed with a 7 percent handle but the idea that Italy can carry on with 6.1 percent for one-year paper is a joke."


"For T-Bills there is always domestic demand involved so it's a lot easier for Italy to find buyers to lower the exposure. But the main point to be concerned about here is the huge 250 basis point jump in yields compared to the last time to roughly 6 percent. If this carries on then next month's yield could be 8.5 percent, which cannot happen."


"Very solid, far better than was feared yesterday. In the grey market the paper rallied over 120 basis points before the auction, and it's come through the market by a considerable margin. The micro view is supportive, but this makes no difference to the macro view of Italian rates trending sharply higher. The pressure is still on for policymakers to take aggressive action to increase confidence and stop the market breaking down further."


"Net flows and interesting yields have supported demand. Domestic retailers have probably supported demand as they usually roll their positions."

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maxw3st's picture

Looking at the chart there can be no doubt a central bank was in there running up the market. It looked like a BOJ intervention with the Yen.

paarsons's picture

I really love you guys.

I find your naivete charming.

Do you really think the most powerful men in the world are going to let their Ponzi scheme collapse?

Is that your thesis?

Grow up, my brothers and sisters.

TrafficNotHere's picture

Illegal? Seriously, like they care? The governments and central banks of the world no longer care about trivial thinkgs like "legal". Thats only for us peons so they can use the law to control us.

French Frog's picture

"to keep Europe from imploding one more day"

Be grateful for small mercies


sqz's picture

Isn't it more likely that the Italian central bank/government leaned on its subjects to take part in the 12-month bill or else? These Italian banks do hold 3x more of this stuff than non-Italian banks! Yes, obviously this is illegal too, but nothing to do with the ECB. Also, obviously after a while this domestic intervention will make no difference either.

The ECB has so far proven to be extremely resilient to changing its mandate for the sake of anyone and when they do get involved in issues outside their comfort zone (though not illegal), their funding tends to be very specific and transparent. That may not stop them when shit really does hit the fan, but for now Occam's razor probably applies...

Hard1's picture

Brilliant reporting on what the banking system has become. ECB telling banks to buy the auction since they will step in and buy bonds afterwards should win a Pulitzer and unleash big changes in the ECB and banks if we were in an honest world.  Pity that we live in this denial-fantasy situation. Thanks Tyler.  Keep it up!

Belarus's picture

They will see the results of these forays success and make them more brazen than ever. Remember, the sheeple doesn't care one iota so long as the DOW goes up. Nothing else matters. No one really has any idea what our own Federal Reserve is up to, and no one really gives a shit either. 

Seer's picture

Can't defy physics.  Ponzi Schemes can ONLY collapse.

paarsons's picture

You know what you motherfuckers truly are?

And you'll hate me for saying this.

But you're idealists.

God bless you for that. 

But I live in the real filthy world.

And these motherfuckers are powerful and tough to beat.

Like Lloyd Blanfein said, they make the markets.

You might as well tune-in, turn-on, and drop-out.  Why?  You ain't gonna change shit as long as you participate.

These cunts own everything.

Bananamerican's picture

"And you'll hate me for saying this..."

"Give up earthlings! Resistance is FU-TILE!!"

Fuck that. The bastards are going down...They've simply gone too far this time

jekyll island's picture



I don't understand your reasoning.  Surely you have read the history of fiat currency and know that gold is 15-0 all time in these head to head meetings.  Every civilization that has debased their currency caused widespread economic ruin and the destruction of the ruling class.  Is this time going to be different?  Get some popcorn and quit trolling. 



TBTF's picture

Destruction of the ruling class for certain? 

Kina's picture

LoL sounds like a cliche, or some kids founds dad's shoes.

centerline's picture

You are correct on this.  But you need to seperate these folks into different categories.  I will give it shot for shits and giggles:

There are those who are really running the game.  We dont hear about most of them.  These folks know the ponzi is coming to an end.  They know what is coming.  They are planning for it.  It will be one of them that decides when to kick the final brick out from the base of the wall.  They are positioning themselves as they see appropriate.  They work on timeframes much longer than we do... generational timeframes rather than decades or years.  Considering that most people dont think past the next paycheck, the advantage here is monumental.

There are those who are "generals" in the game.  We hear alot about them.  They know the drill but dont call the shots.

There are those who think they know the game - but dont, or are not close enough to it get an angle on what is coming.  Ego leads alot of these maniacs into thinking they actually can beat the math.  These folks are in the majority of the 1%.  Lot of folks we hear about fall into this category.

There are those who are just wannabe's who probably just fuck things up more than anything else.  They really haven't a clue.  They are 99%, just dont know it yet.  But, nonetheless, they are powerful players right now.

From here, it is a certainty that the current global fiat ponzi will end.  This is just math.  How it ends, what is next, and so forth... these are some of the variables.  But, the key issues at play here are oil, food, water, and overpopulation.   I would have added "when" to the list of variables, but all told, we know that we are a handful of years at most away.

What makes all of this so unpredictable when viewed in a short timeframe is that there is no unified NWO bullshit.  Yeah, there are some loose alliances (some more loose than others) - each with thier own vision of the future.  But, there is no way to assemble a "global" majority.  And when you have power pulling from so many directions, coupled with all sorts of idiots creating even more noise in the system, there is no way to tell when one of the big boys decides to start the dominoes in motion.


Overflow-admin's picture

Right. So it's time to find alternatives for the 99% so they dont end 100% fucked.


Inform yourself on organic farming and non-hybrid seeds. Then start farming. It's the ONLY possible exit where you don't end starving to death. And it works sooo good!


Fuck the banksters and agro-chemicals; restore your link with Earth; regain your mental sanity.

RiverRoad's picture

Sorry to say it but that last domino is war.

Spastica Rex's picture


I would like to do as you suggest. Here's where I'm at now:

I'm jobless, poor but debt free. My wife makes a small salary as a science teacher at a Catholic School. With two degrees, I can't get any job. We have two children, one in high school and one in junior high. We have a small amount of savings - cretainly not enough to purchase five acres of farm land and a place to live. We currently rent a very small house at a cost of about $600/month more than a 30yr mortgage for a similar house. We eat into our savings a little bit each month.

Can you expand on your suggestion? I would love to hear the details, becasue I just haven't been able to work them out myself.

1835jackson's picture

Rothchild's keep the music playing

aint no fortunate son's picture

was there somehow ever any doubt that the ECB would intervene, or that Bernanke would be funding them? Please, reality check folks, this is the gulag, not a free market

DeadFred's picture

The doubt arose in the last two days when they needed to intervene yet sat on their thumbs.  ??  What, was someone asleep at the switch? Too busy with the ECB version of Bunga Bunga? Why did they not step in early enough to prevent the margin increase? Two days ago this amount of money would have calmed the market, now it's shoveling sand against the tide. The answer to that 'Why' would be extremely valuable to know.

lolmao500's picture

Italy’s Senate rushed to pass debt- reduction measures that clear the way for establishing a new government that may be led by former European Union Competition Commissioner Mario Monti in a bid to restore confidence in Europe’s second-biggest debtor.

Next Italian PM? Mario Monti, member of the Trilateral Commission and Bilderberg Group of course!

And vote tomorrow on the austerity bill... hopefully they defeat that so the EU can finally implode for good.

westboundnup's picture

No doubt central bank intervention . . . but which one?

Gief Gold Plox's picture

Why, fucking all of them. After all it's in every central bank's best interest to keep this idiotic system in place. One by one, I'm pretty sure all of them will do whatever just to prolong the agony for atleast one more day.

jekyll island's picture


Good point, but in the end does it really matter?  ECB has been watching the fed do this for the last 3 years or longer.  How long before this comes back to the US?  It is coming back and it won't end well.  I suppose this is why PIMCO and all the bond traders talk about shorting treasuries, they sure go belly up quickly.  I just hope we will have the courage to end the "legal tender" fiat in conjuction with cancelling the fed's charter.  If both of these steps are not taken central bank activity can be transferred to the US Treasury or anywhere the politicos want to put it.  

Rollerball's picture

Can't get anymore central than BIS.  But 1 years' are "intermediate" --

BlackRock Responds To Zero Hedge Query On Its Italian Debt Exposure


Josephine29's picture

Even so this was very expensive for Italy if we look at the numbers and compare them with the last similar auction.

Todays news has a real cost for Italy and the ECB


An illustration of how things are going has come as I type this from an Italian one year bill auction the details of which are below.




Whilst the ECB does not take part in a primary issue it would have been buying similar debt on which the yield has nearly doubled in a month. Thats the sort of thing which is you are a bank trader gets you called into your managers office. Also as I have explained in my article on bond yields in the explainer section this is a real cost to Italy from this crisis, by my maths some 126 million Euros.

jekyll island's picture

Whew, I thought you were talking about real money there for a minute!  The Euro is moving towards it's intrinsic value.  

jcaz's picture

Yep, they're bending the rules, no question-  gloves are off now.

longonSpam's picture

Please, the law expires with the third comma.. I think we all get that by now.

ndotken's picture

Why would any investor buy a 6.1% bond when the same security can be had for almost 8%?  There's something fishy in Denmark ... i mean, Italy

jekyll island's picture

Why would I want billions, when I can have millions?


AngryGerman's picture

farce. shouldn't pay too much attention to it. they are fucked.

it is more than time that the ecb has to lay openly all their doings. things have moved beyond merely trying to stabilize the financial system, we are no outright at manipulating markets, economies, and governments.

if this will continue for some more time to come, the little bit of belief in democracy left in Europe will be washed away and we will see voters turning to extremist positions in the next 2 years.

politicians are trying to save the euro, but forget that they thereby risk a democratic, peaceful, cooperative Europe.

they will realize soon enough, hopefully it won't be too late then.

reload's picture

But the poorer nations of Europe do not want austerity, they want more of this:- 

Some years ago a small rural town in Italy twinned with a similar town in Greece.

The Mayor of the Greek town visited the Italian town. When he saw the palatial mansion belonging to the Italian mayor he wondered how he could afford such a house. The Italian said; "You see that bridge over there? The EU gave us a grant to build a two-lane bridge, but by building a single lane bridge with traffic lights at either end this house could be built".

The following year the Italian visited the Greek town. He was simply amazed at the Greek Mayor's house, gold taps, marble floors, it was marvellous. When he asked how this could be afforded the Greek said; "You see that bridge over there?"

The Italian replied; "No."

mailll's picture

How many mansions did the Solyndra recipients of our tax dollars build?  What happened with Solyndra happens every day, many times,  but on a smaller scale, so people don't notice. Solyndra got noticed because they went bankrupt.  And it amounts to much, much more than just a half a billion dollars in total.  Govt. spending and waste is just as bad as all this Federal Reserve money printing.  It all goes to making the rich, richer.  But in order to lower the budget deficit, they want to take food out of peoples mouths so the rich can continue to get richer on these Govt. and Fed schemes. 

Belarus's picture

Of course, mailll. The two largest job-growth industries over the last ten years have been subsidized by Government money: defense contractors and health care. 

The entire system is a farce. There is almost zero capitalism anywhere you look. 

Manthong's picture

€ 3 Billion? ..EZ chump change.

Berlusconi’s probably paid more for hookers.

TooBearish's picture

Ty - why is the fuk u gunna allow arcaine rules and laws get in the way of central planning and the NWO - I mean WTF get a clue - MFG allowed to pillar cust seg funds (illegal) to self fund!  Comon man its 2011 get with the plan!

Racer's picture

These banksters can get away with any illegal activity they see fit, yet the ordinary person is made to stick to the letter of the law on the tiniest of misdemeanours  with punishment by custodial sentence if they don't pay any fines

Seer's picture

Latest from Clarke and Dawe:

The Way Forward for Europe

SDRII's picture

itlay should noit have called for a halt to bombing in libya.  retribution for putin ties and libya 

YesWeKahn's picture

Are you sure that that was ECB not ZCB of Bernanke?

nowhereman's picture

Is the 50% haircut already factored in?

Outlaw Of The Wasteland's picture

central planning and global feudalism, bitches


We don't need no stinking Enlightenment.

jcaz's picture

Just stupid-  the longer they prop it up artificially, the harder it will fall in the end..... 

Which is what happens when politicians rule the world.....

lolmao500's picture

Deeper euro zone integration is necessary to face the challenges of the sovereign debt crisis, but the process must not create any divisions in the euro zone or the wider European Union, the European Commission said on Thursday.

Is this guy for real?

RoadKill's picture

It's easy to figure out what happened, and I doubt it was illegal.

Simply call up banks and tell them you are looking to buy $X billion of Oct 12s starting Y minutes after auction. You can say it should be illegal, but it's not. This is no different then pulling Italy from the mkt like Greece and Protugal. It will take the market a few days to figure this out.

Europe ain't going bust till the ESFS is expended.

No one said shorting was easy work. You can't expect to get paid massive returns for holding no risk overnight.

I've been short SMDD since 22 and FAZ since high 40s. Being willing to take pain and DOUBLE down at 17 and high 30s is the secret to success. BTW STILL NOT ALL IN. Maybe 2/3rds of my capital is allocated short. I'll look at putting more to work today or Friday. Not sure if I buy SMDD and FAZ or cover some puts I sold to buy FAZ at $4 and $5 back when SPX was 1,080 and VIX was 50.

ziggy59's picture

musical chairs..and then there was one...left.


chistletoe's picture

before the auction, gold was down $5.


now its up $2.


any questiions?