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What The Analysts Are Saying - Wall Street's Kneejerk Response To Oversized LTRO
Below are select knee jerk responses by Wall Street analysts, which as warned repeatedly, are broadly skeptical for one simple reason: by delaying much needed ECB intervention, which is the only "bazooka" in this case, the solvency crisis in Europe's financial core will continue to escalate until the next time around it will require far greater stop gap measures. Bottom line - this solves nothing.
RICHARD DRIVER, CAXTON FX ANALYST
"The big figure was welcomed initially but huge demand for ECB loans is not exactly a massive positive and really just reflects the huge squeeze European banks are feeling at present.
"Certainly this will help ease liquidity, as will last month's coordinated central bank action on dollar swaps, but it also highlights the gravity of the situation in the eurozone - so don't expect sustained euro gains.
"The market will once again be left to conclude that EU officials are addressing the symptoms but not the cause of the current debt crisis."
CHRIS WHEELER, BANK ANALYST AT MEDIOBANCA IN LONDON:
"It's helpful. It's more than a sticking plaster, although it's by no means the solution longer term. The solution to the sovereign is essential to deal with the solvency and liquidity issues around banks in the longer term.
"But the liquidity issues are the most pressing and that's being addressed through this three year money. It shows people have taken on board the encouragement to get in early, to make sure they are well balanced and positioned to both refinance and to continue lending.
"It will not just be the weaker banks, it will be the stronger banks too. They are being encouraged to do it and there's no stigma in doing so, so you can get the cheaper money and fill the gap."
CHRISTIAN SCHULZ, SENIOR ECONOMIST AT BERENBERG BANK
"This is of course good news for euro zone banks. The number beats the previous record of 442 billion euros (the ECB allotted) in June 2009. It is highly unlikely now that banks in the euro zone will go bust because of liquidity shortage.
"This is an invitation to buy government bonds especially for smaller, unlisted banks, which do not take part in the EBA stress tests. For large banks, which are listed and which will have to face another EBA stress test next year, the motivation to buy government bonds is lower, because they fear that EBA will require more capital for bank holdings of peripheral debt and that will dilute existing equity."
JONATHAN LOYNES, CHIEF EUROPEAN ECONOMIST, CAPITAL ECONOMICS
"The very heavy take-up of the ECB's three year long-term refinancing operation (LTRO) provides some encouragement that banks' liquidity needs are being amply met.
"But while this might help to address recent signs of renewed tensions in credit markets and support bank lending, we remain sceptical of the idea that the operation will ease the sovereign debt crisis too as banks use the funds to purchase large volumes of peripheral government bonds."
MARTIN VAN VLIET, SENIOR ECONOMIST AT ING
"The take-up of loans is massive, and even higher than in the ECB's first 12-month longer-term refinancing operation (LTRO) of June 2009, which attracted demand of 442 billion euros.
"However, the lower number of participating banks (523 versus 1121 previously) suggests that the take-up is currently less widespread - and probably more concentrated in banking systems in peripheral euro zone countries. We will be keeping a close eye on national central bank data over the next few weeks for further clues on which countries' banking systems tapped the three-year facility.
"Today's allotment of three-year loans is equivalent to almost one and a half times Spain and Italy's combined sovereign bond issuance in 2012. However, we doubt whether the money will be used extensively to fund purchases of peripheral debt, given concerns about mark-to-market risks and possible reputation risks."
ANNALISA PIAZZA, NEWEDGE STRATEGY
"The take-up was a massive 489 billion euros, much higher than the expected 300 billion euros. Liquidity on the banking system has now increased considerably.
"In a nutshell, the three-year auction can been considered as successful in terms of adding liquidity to the banking sector. We believe most of the take up has come from EMU periphery's banks which have more problems with long-term fundings. However, given the large number of banks participating at today's auctions, we cannot rule out some core countries' banks have started to put on some carry positions."
ALINE SCHUILING, ECONOMIST ABN AMRO
"The result was well above the consensus expectation of around EUR 300 billion.
"It could also allow banks to engage in a carry trade, in which they would use the ECB funds to purchase higher yielding government bonds.
"This seems to partly explain the unexpectedly strong demand for recent Spanish bond auctions, as well as the sharp decline in Italian and Spanish bond yields over the past few days. Looking forward, the next three-year LTRO will be allotted by the ECB on 29 February 2012. Since banks have high refinancing needs in the first quarter of next year, demand for this LTRO might be strong as well."
JAMES NIXON, SOCIETE GENERALE
"This is good. It's a positive number, at the top end of expectations. You have to regard it as a positive result. This is at least a solid 240 billion euros (net) increase for banks. But it is still short of covering all of the banks' financing for next year. So, it could ease fears of a credit crunch somewhat."
Source: Reuters
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"- this solves nothing"... But the crisis is over, right? BULLISH!!!
ECB quantative easing would be Eurobond-style common debt pot between Eurozone countries which would solve nothing and just pool sovereign risk.
This achieves about the same money boost if banks lend forward some of the €500 bn, but since e.g. Italy is responsible for Italian banks, joint liability to Eurozone is limited.
Good move.
We tend to forget that the name of the game is "Kick the Can Down the Road", and they just gave it a good kick , and the crowd goes Wild!!!
This identifies the size of the trouble over there. 500+ banks huh. Going to need a bigger ltro.
I said it over a week ago...
Do not underestimate the power of the few to ensure the bonus pool is intact. The party in the Hampton's MUST prevail!!
merry xmas everyone!!!!
But it is still short of covering all of the banks' financing for next year. So, it could ease fears of a credit crunch somewhat."
Eh?
I'm glad that these bankers have everything under control in the Eurotrashheap. Now lets put a few more point on the DOW scoreboard!
from G Edward Griffin of creature from jexkyll island- excellent video
Unicredit halted limit down
i guess the italians did not realize that there's (practically) free money available. Lazy gang...
All the criticism of LTRO is dead wrong: the first aim is to fund the banks with liquidity. Nothing more or less. A new Lehman has thus been avoided. Bye bye crisis. Told you sooooooooo. Merry Christmas.
"fund the banks with liquidity".....
That alone pretty much demonstrates your grasp of the matter......
i got nothing to add to that.
The fact is: for a few years (to be extended) there's liquidity and no bankruns to expect. No collapse of the eurobanking system, as I expected. There were so many economical and political "threats" this year which could cause "major shocks, collapses, meltdowns" of the eurosystem and what not. But here we are: the euro and the banks saved, stocks up, US economy and housing up, no hard landing China (they will not let "it" happen), German economy better outlook. Looking forward to 2012. #Where'sArmageddon?
Enjoy your vacation, and when you are back from Happyland, try to look beyond daily headlines. And don't trust official stats.
Fact: the banks are saved. No Lehman, no new crisis.
You forgot to insert "for now". And we are not looking for a "new crisis", we are still in an ongoing one.
Mr German, the eurobanks now have short term funding, to rollover other shorts. It works.
but solvency is the problem. st funding cannot help for their structural problems. and it does not improve capital bases. so after all your rolling, where will banks capitalize up?
Well, apparently the bankers so any advantage now. That's what counts.
so you are telling me that there is no no armaggedon bc banks got cheap money? wow, i mean really wow, i don't even know what I should answer to that...
If it does not work, why are the bankers queuing up?
If you give out free heroin will junkies not line up?
You are either a troll par excellence or a dope.
pssst....troll. Do not feed.
So "lending" half a trillion euros to the banks ten days before year's end didn't solve the underlying problem?
Quick, someone call Sarkozy and tell him that Corzine was wrong.
just listened to Mein Kampf Audio Book and was surprised to find that Hitler does a better job explaining the financial crisis we are facing better than anything ive heard by contemporary pundits. The European nations are finished. Finance capital will control the commanding heights of all societies. Arguing about whether or not Europe will or will not unite is futile, there will be no other way. To those who have not treated themselves, i urge everyone to listen or read this profound work instead of accepting the common 'analysis' of so called 'intellectuals'.
As to whether or not financial control of previously sovereign nations is moral, just, or benficial, that can only be a matter of personal opinion.
Wow! Well I have a private message for you:
http://www.youtube.com/watch?v=ljbZKQIUZvM
fuck you kita! if you are so naive, be my guest, but spare us your "insights"
I haven't read the book, but I did enjoy the musical very much.
The song I remember best went something like:
Take 200B, add re hypothecation, and let ferment for three years. Smells good too.
Markets tank globally.
Currently on Yahoo Finance:
Stocks get boost for big ECB loans to banks Global stocks get boost after European Central Bank lends big to banks