Gaming out the impact of this week's LTRO2 demand on global risk assets is complicated by the ability of banks to mobilize collateral (how much can they pledge to the ECB and how much of that will be 'optimal' given the implicit subordination of senior unsecured debt holders), the use of those funds (carry trade economics are considerably lower and refinancing needs remain high), and the market's expectations (just how much more back-door QE is priced into European - and for that matter - US asset prices). Goldman Sachs surveyed its clients and found a gaping divide between banks and investors with the latter expecting considerably more than the banks - it seems someone will be disappointed - investors hope for more and banks expect to do less.
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