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Summary - LTRO Represents 20% Of European Bank Deleveraging Needs
As warned here repeatedly, there are only two ways of looking at today's LTRO - a risk on perspective according to which European banks will double down even more, load up on carry, and buy even more sovereign debt, knowing full well the market will eventually punish them for holding this paper, or a risk off, in which banks will shore up capital to prevent massive asset sales and equity dilution in the upcoming deleveraging wave. And with multi-billion BWICs already hitting the tape in the past week, confirming Euro banks are dumping assets, judging by the gradual blow out in European yields, finally the market has also understood that it is the latter that is happening, not the former. Lastly, as a reminder, European deleveraing needs in the "near-term" are €2.5 trillion, meaning today's LTRO barely covers 20% of total needs, and is even less if some banks indeed foolishly decided to partake in the carry trade.
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Insert wrench into euro market here.
But I was soo confident it would solve the world's problems
This is not a market for young men.
It is the thought that counts. And I think this is just how they get started. Every bailout starts with good intentions and 1 dollar.
LOL- actual numbers for the morons who think "the liquidity crisis" is over.....
LIBOR says there never was a liquidity crisis. There is a solvency crisis. LIBOR never broke .3%. In 2008 is was over 5%. You cannot have a liquidity crisis with that much free liquidity.
Dude- re-read my post, note the quotation marks.....
Sarcasm lives.....
Oops. Sorry. I missed that.
"double down" - it is like playing poker: What do you do when yous stack is becoming small: All in on the slightest chance. You win, welcome back to the game. You loose, do a buy-in and welcome back to the game.
Thus, since a buy-in for banks can only mean direct funding by governments (aka partial/full nationalization), sth governments want to avoid at any costs, allowing banks to double down was their dominant strategy. Voilà!
Hey I haven't been reading the hedge for like 2 days... what the fuck is LTRO?
Long term refinancing operation :)
It might be Phase II of the current Currency War: The ECB gives you, dear bank, a very generous 3 years loan (which might/will be extended, of course) if you buy/keep/roll-over European Sovereign Bonds. Meanwhile, your government - if you are an European Bank - pressures you in doing it.
If this goes on as I expect, it will act as a surrogate to what all banks wanted, i.e. EuroBonds and a QE. It might also make the European Banks more supple to their government's wishes. This might, at a later stage, include the forced recapitalization and/or nationalization of them. Nothing really new, on this continent. The EFSF looked, IMHO, as a "Fallback-Bank-Nationalization-Vehicle" from the very beginning.
Last time something similar happened it was in Italy, until the Eighties. For all the obvious failings of this system, it worked for them.
Since the UK banks "naturally abhor" this kind of schemes and still think there is a pound of flesh to have from shorting EZ sov bonds (thanks to their banking laws, including endless re-hypotecation, they are perfectly suited for this biz), they might be soon the targets of covert/open retaliation (including the last attempt to cajole them into a Tobin Tax or similar) if they don't "desist" in their bear raids... From there, the scenarios become endless.
The only good thing about Currency Wars is that you don't need to spill young men's blood. It's the only thing, though...
Long-Term Refinancing Operation
A pixie that lives at the bottom of the garden, who actually turns out to be a disfigured, monstrous and evil troll.
Who did they take that money they gave to the banker's from? If it is the peoples money that they stole it from I say that was a bad idea. As Bob Zimmerman said, "A lot of people got a lot of knives and forks on their table and they gotta cut something." Arrn't they afraid someone will get them? Maybe they do not know that people include owners of other powerful entities that stand to lose out in big ways. Maybe someone should tell them their faces are replacing bin ladin's turbin headed face on barroom dart boards.
A little help here please: "BWIC"?
Bid/Bids wanted in competion
Basically looking for the smuck who will pay the highest. :)
Well since they were basically giving money away it must stand for
Ben Was In Charge
In Morgan Stanley's "research" paper, they state European Banks require 1.5 to 2.5 trillion of near-term deleveraging. I must say that is a very high range, give or take 1 Trillion Euros. WTF kind of research is that? In any case they restate the obvious deflation / depression for 2012. The implied solution is to print Europe out of the problem with a couple trillion dollars of worthless Euro bucks that should be promptly deposited with the Banksters.
Thought some people might find this interesting. It's the "Our Mission" section of the World Policy Conference website.
http://www.worldpolicyconference.com/wpcmeeting.php?lien=wpc&&edition=2011&&lang=en