UniCredit Failure Concerns, Spanish Bond Margin Hike Rumors Drives V-Shaped Recovery In "Risk Off"

Tyler Durden's picture

Following a relatively quiet overnight session which despite various bond auctions in Europe did not see any flagrant contagion, and in which ongoing ECB buying of Italian bonds led the 10 Year BTP spread back to 6.75%, things have taken a very quick turn for the worse once again, and the BTP is now back at the day wides at 7.10%, following the following Reuters headline which is rather self explanatory: RTRS-UNICREDIT CEO, IN MEETING WITH ECB, TO ASK FOR MORE ACCESS TO  ECB FUNDING FOR ITALIAN BANKS BY WIDENING TYPE OF COLLATERAL  USED-SOURCE CLOSE TO BANK. Hmmmmm, UniCredit....where is that name familiar from. Oh wait, that's right - it was, once again, the top name on yesterday's Sigma X report of most actively traded companies by Goldman's special clients. Good to see there was no leakage here at all, none. And making things worse across the Mediterranean is the rumor that LCH Clearnet will promptly follow suit, and hike Spanish margins now that the spread to German Bunds is over 450 bps. Bottom line: Same Europe, Different Day. Here is our perfectly uneducated guess - market plunge in the morning in which institutions dump, ramp in the afternoon in which retail and HFTs buy.

More on UniCredit:

UniCredit will ask the European Central Bank at a meeting on Wednesday to increase access to ECB borrowing for Italian banks, a source close to the bank said, highlighting funding concerns among the country's lenders. In a sign of growing funding strains on traditional refinancing channels, UniCredit's net negative interbank position at the end of September rose to 67 billion euros, from 44 billion in the previous quarter, said Cheuvreux analyst Silvia Benzi. "Going forward, this funding mix is barely sustainable, particularly in a context in which regulators are pushing for a more balanced funding structure," she said in a report.


Italian banks have increased their reliance on the ECB for cheaper funding since the summer as the euro zone's third biggest economy was sucked ever deeper into the region's debt crisis and its lenders faced sharply higher refinancing costs. According to the latest Bank of Italy data for the month of October, ECB funding to Italian banks rose to 111.3 billion euros ($150 billion). Total borrowing stood at 41.3 billion euros in June.


In comments confirmed by a spokesman, UniCredit Chief Executive Federico Ghizzoni told Corriere della Sera daily he would ask the ECB, also on behalf of smaller Italian banks, "to extend the access to ECB liquidity by widening the type of collateral offered." Ghizzoni's visit to Frankfurt for the Euro Finance Week meeting of central bankers, regulators and banking executives, comes two days after Italy's largest bank by assets unveiled a 7.5 billion euros rights issue after booking 9.8 billion euros of writedowns in the third quarter.

V-shaped "recovery" in Italian Yields...

And Italian Bund Spreads:

And here is why LCH margin hike grumblings for Spanish bonds have surfaced.

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Spooky Polish's picture

I feel failure in the air ... 



French bonds looks nice too...

Oh regional Indian's picture

Bond vigilantes will penetrate any spreads. 


Youtube Trailer


MarketTruth's picture


How much will the ECB give for a flaming bag of dog shit... such as CMBS backed defaulted loans. Hey, if JPMorgan can somehow sell this pile of flaming shit to investors, surely they are great (AAA-rated of course) collateral for the ECB.

dough eating squid's picture

Looks more like a W to me...

Irish66's picture

BOE more stimulus

silver500's picture

 Don’t be stupid, everything is fine.  We will shortly return to stable economic growth. Ben Bernanke is the new Messiah!!   Moses, Mohammed & Jesus will be consigned to the dustbin of history.  All heil our honest, righteous and genius leader, Ben Bernanke…

Zero Govt's picture

Yes Ben is very good isn't he? No idea what all the flak is about and why he and the Fed are taking so much stick. People are under-estimating his hard creative work .....'print'

His Mandate from the US Govt is to back-stop the banking system. Namely be the worst investor on the planet and buy up every turd Blankfein and Dimon plop on the pavement ...not the bag lady, think of Ben as a super pooper scooper

LaLiLuLeLo's picture

everyone knows that potus is the real messiah - the 21st century pop version of jesus.

lizzy36's picture


ECB spent €1.5bn' on Spanish and Italian debt this morning and is in buying Italian bonds again.

But because EUR up 70 pips from morning lows in last 15 mins futures have covered 50% of their morning losses.

Also on Greece this is funny:

Consortium of Greek bondholders, have agreed to swap their current bonds for new ones worth just 50% of their current value, although the final figure has still to be thrashed out. But in return, they are understood to be demanding that the future interest rate on the new bonds will be around 8% a year.

Peter K's picture

Merkel just out with latest: all that is needed is some changes to the existing treaties to win back market confidence.

That's the ticket, Angie:)

eurusdog's picture

EURUSD is even getting in on the game after setting a new monthly low in Euro trading. Will be nice to see it go to parity, still short the  pair. As well as AUDUSD.

SwingForce's picture

How does the ECB feel that everything it buys goes underwater immediately?

Spooky Polish's picture

Like Lehmann and his brother :) 

Ethics Gradient's picture

C'est la vie. It wouldn't be buying them if yields were decreasing.

I'm sure though that if asked they would report that they were happy with thier purchases as they were bought on the secondary market and therefore priced correctly.

They are idiots who think the rest of the world is more stupid than they are.

moriarty's picture

They don’t care; it’s not their money, and they will all still get their share from the Eurorocrocy trough funded by the poor old tax payers. C’est la vie (for now).

TooBearish's picture

In other news the perma bulls at DB are revising GDP estimates HIGHER on un-inflation indexed Retail Sales report...wheeeeeeeee!

disabledvet's picture

"Tyler Durdens('?) finest hour(s)." It is my "raison d'etre" to simply read it. We've come a longe way...starting with creating hearings in the US Senate to being the only place actually exposing what was really going on with Fukushima. There's been so much in between (HFT'ers, Prime X, Solyndra and simply "Bruce" and "Banzai"(i love that name!) in general) it's really quite amazing that none of these funadmental issues would even be discussed were it not for "here." And of course we've taken casualities and we will take more, some are lucky to have made it this far, we're with the fight of OWS...but this "Europe" story is the one that is going to have the major material impact on the global "raison de etre" for decades. It will only be "reported" on here.

oogs66's picture

UBS's new CEO is from unicredit :)

CreativeDestructor's picture

Unicredit is looking for a new CEO from.... Goldman (ECB and Fed plant)

ACP's picture

Isn't that a John Woo movie?