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’On balkanisation and credit claims
We missed Willem Buiter’s comments on “additional credit claim” ECB collateral when they were published on Monday. But since it’s pretty strong stuff from the Citigroup economist…
(Might need a key.
LTRO credit claims, not so carry trade
Just as “free lunch” appears in a Bloomberg headline on the ECB’s three-year liquidity…
Here’s a pair of interesting analyst reactions to Friday’s details on eurozone central banks’ rules for accepting additional credit claims.
Those haircut-heavy credit claims [updated with more haircuts]
Update — apologies for a rather disorganised (and long) post… but we’ve finally gained information from all seven eurozone central banks who’ll accept additional credit claims under the ECB’s new rules…
Greek funny money
Greece is not printing its own money already. No drachmas are being issued by Greece, nor is there monetisation of public debt. However….
And with that rather tantalising intro — Stephane Deo of UBS blows the lid off something we’ve been wondering about Greece for a while.
LTRO-ing, with Magnus
Intesa Sanpaolo’s chief executive says he’ll use ECB funds to buy Italian bonds…
BBVA sells the first senior unsecured bond to be issued by a Spanish bank since October… (like Intesa a few weeks ago.
Who tapped the LTRO, cont’d [updated]
Just one name today, but hopefully it rams home why banks are using the ECB’s three-year liquidity. From BBVA’s latest results:
Making use of the new lending facility provided by the European Central Bank (ECB),
The Volcker Rule riddle
There’s no shortage of concerns about the impact that new regulations will have. Basel 2.5 hitting the bond market, the prohibition of ratings under Dodd-Frank hurting the beleaguered mortgage market,
Revised ECB liquidity number du jour
More ECB LTRO stuff, this time from Credit Suisse’s European banks team:
Furthermore, there has been a lot of commentary surrounding the potential utilisation of the second tranche of 3yr funds due on Feb 29th,
Margin call, the LTRO movie
Another reason why we don’t like the meme of viewing the ECB’s three-year liquidity as (or in any way analogous to) “quantitative easing” for sovereigns:
Mark-to-market risks remain key
As the LTRO is a repo transaction the ECB takes in collateral in order to back any loans.
Who did, and didn’t, tap the three-year LTRO
Nice and big table (click to enlarge) from Morgan Stanley analysts, who are very much in the ‘it’s all about refinancing bank debt’ camp on the purpose of the three year ECB liquidity. More on that in a bit…
The curious case of ECB deposits
Bank of America Merrill Lynch analysts have taken objection to everyone interpreting high use of the ECB’s overnight deposit facility as an indicator of ‘bank hoarding’.
It is just not so, they say.
Unlisted in euroland
Remember this?
First, the Eurosystem has abolished the eligibility requirement (Sections 6.2.1.5 and 6.2.1.6) that debt instruments issued by credit institutions, other than covered bank bonds, are only eligible if they are admitted to trading on a regulated market.
Decommissioning Dexia — a collateral story
(Aren’t all the best stories collateral stories nowadays?)
Cast your minds back to December. Borrowing from the ECB Marginal Lending Facility is ballooning past €5bn – and staying there for days on end – despite its penalty rate.
Banks, bezzles, and ECB liquidity
Quote du jour from an excellent IFR article, doubting the Sarko trade:
With bank debts coming due and most firms unable to raise fresh funds in bond markets – which remain largely closed – bankers say it is much more prudent to use ECB loans to pay off their own creditors rather than speculate that European governments pay back all their debt.
Endangered supranational kangaroos
Here’s an interesting ripple effect to consider… downgrades of AAA-rated European supranational debt, hitting the Australian bond market.
As Nomura rates analyst Martin Whetton wrote in a Friday note — there aren’t that many Australian government bonds.
Not a lot of cash in the Attic
There’s so much to read in the IMF’s latest report into Greece’s bailout, released on Tuesday…
Although firstly we just want to point out what the Fund says about an increasing lack of cash inside the Greek state.
How dealers may have exacerbated the funding crisis
Another interesting snippet from the BIS quarterly review regarding the role played in the recent funding crisis by the deteriorating operational capacity of broker dealers:
As the market values of euro area sovereign and bank debts fell and became more volatile,
Regulating 2000s RBS… with 2010s rules
…we don’t like carrying more capital than we need to. You’ve heard me before on the subject of building up war chests and carrying; that’s not the way we would wish to operate at all.
– Fred the Shred on an investor conference call,
Corporate bonds to the rescue?
Back in September, the FT reported an interesting estimate by JP Morgan.
Twenty-eight European banks would have faced a total liquidity shortfall of €493bn at the end of 2010, if they had been forced to meet new liquidity requirements (which actually come due in 2015) then and there.
Collateral crunch, meet BoE
In light of the continuing exceptional stresses in financial markets, the Bank of England is today announcing the introduction of a new contingency liquidity facility, the Extended Collateral Term Repo (ECTR) Facility.
Dexia’s collateral-crunching guarantee
It is an irrevocable, unconditional, direct, autonomous and first demand guarantee. The guarantee is joint but not several, and the allocation between the States (respectively 60.5, 36.5 and 3% for Belgium,
Keeping it liquid Eurozone
An interesting data point in the wake of this week’s SMP sterlization fail.
The amount of cash on overnight deposit at the ECB has breached the ‘psychologically important’ €300bn for the first time since June 2010.
More on the dollar crunch and the liquidity drop
Right, here’s some early reaction to the latest central bank liquidity drop.
It comes from RBC’s Michael Cloherty, who makes the astute observation that it is now cheaper for foreign banks to borrow dollars from their central bank than it is for a US bank to borrow from the Federal Reserve:
A Minsky moment in the eurozone?
Named after the economist Hyman Minsky, the phrase describes a situation where investors who have borrowed too much are forced to sell even good assets to pay back their loans.
– The Guardian, 2007
Of bonds and automobiles
It’s universally accepted that the moment you drive a car out of a showroom, it will be worth less than what you bought it for.
It’s one reason why ‘car finance’ makes dealers so much money. They offer you the cash to buy the new car outright,
Dexia’s midnight liquidity
Nov 23 (Reuters) – France, Belgium and Luxembourg are discussing how to provide temporary state debt guarantees for failed financial group Dexia… the deal has still to be confirmed, leaving the bank dependent on emergency liquidity assistance of about 30 to 40 billion euros ($40.5 – $54 billion),
If you tolerate this, then your T-bills will be next
In the sound and fury of eurozone sovereign debt activity on Tuesday, we forgot to take note of Belgium’s auction of short-term T-bills.
It was not good.
It was really not very good:
Yields on both the three-month and 12-month paper sold reached three-year highs.
Is Basel 2.5 hitting the bond market?
What can be confusing about the carnage in eurozone sovereign bond prices, is that there are so many factors at work all pushing the same way.
There are technical and fundamental factors on top of the blind panic and fear.
What is going on in Italian T-bills?
More to the point — this can’t go on, surely. The Italian 12-month BOT yield, via Reuters:
The yield has gone from 4 per cent on Friday to 5.4 per cent on Tuesday – ‘rallying’ to 5.1 per cent at pixel time on Wednesday.
The EFSF’s funding funk
Casualty of “market conditions” on Wednesday – the EFSF’s latest bond issue.
The EFSF had mandated Barclays Capital, Credit Agricole and JP Morgan on Monday to price off a ‘no-grow’ €3bn 10 year deal to finance Ireland’s next bailout loan tranche,