The results for the second European 3 year discount window operation, pardon LTRO are in, and the winner is...
- ECB ALLOTS EU 529.5BLN IN 1,092 DAY REFINANCING TENDER
- ECB SAYS 800 BANKS ASKED FOR THREE-YEAR LOANS
Since the expected range was €200 billion - €1 trillion, and just above the median €500 billion, this is clearly within expectations, however notably less than what the Goldman investor survey expected at €680 billion. What is certainly scary is that the number of banks demanding a hand out was a whopping 800, well above the 523 from the first LTRO: clearly many banks are capital deprived.
While unscientific, the fact that LTRO 1 saw €935.4 million, while LTRO 2 was at €661 million per bank, is probably not good at least optically, as it dilutes the average impact of the operation.
The ECB will now collect 1% on a total of €1.018 trillion. We wish the banks happy trails in finding way to monetize this in some carry trade opportunities.
Next the focus will be on how to spin this data as favorably as possible since both a lower and higher than expected number have been prerinsed favorably. And now, the easing focus shifts from Europe which has accepted about as much worthless collateral as it possibly can realistically, to the US, and Bernanke's testimony later today. Unless the Chairman somehow convinces the market that the easing theme will continue, the market, long rising on a wave of global central bank liquidity, will be in for a rude awakening.
Kneejerk market reaction to fade the news. Expect many more kneejerks before the morning is over.