And This Is Where The LTRO Money Went

On the day of the 3 Year European LTRO, in a whim of fancy we wondered if contrary to all expectations, the European banks would not instead of using the money for any real releveraging (carry Trade) or deleveraging (switching out of expensive into cheaper debt) purposes, just park it with the ECB's deposit facility, an outcome which would be the worst possible case as it simply recycles ECB cash from on pocket into another without any incremental velocity. As it turns out, we were only half kidding: as of yesterday, the day after the LTRO, European banks parked almost half of the free €210 billion (recall that while gross LTRO proceeds were €489 billion, only €210 billion was net), or €82 billion, with the ECB's deposit facility, which incidentally brought the cumulative total to a new 2011 record of €347 billion, from  €265 the day before. And that is what monetary policy failure is all about.

Daily ECB deposit facility usage change (negative numbers have been removed as they only occur during monthly deposit facility usage resets when banks park cash with various MROs for regulatory purposes):

And total ECB deposit facility usage: