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’Fitch on who’ll tap the LTRO
A nice visualisation from Fitch of which countries’ banks accounted for most net new liquidity provided by December’s first three-year LTRO, ahead of the second liquidity op this week:
Mostly the Spanish and Italians,
So long, covered bond LTRO carry-trade
The covered bond LTRO carry trade. Pretty attractive in December. Not so much now.
That at least, is the view of Leef Dierks at Morgan Stanley on Friday.
Dierks believes that even though banks will take up as much as €450bn in February’s LTRO,
Germany doesn’t want more of your eurozone goods
Remember how this eurozone mess largely boils down to a balance of payments problem? The peripherals have current account deficits and the northern countries have surpluses. As the eurozone is a semi-closed/unified economy,
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…
Breaking up is hard to do — but here goes, anyway
From Jonathan Tepper, economist, chief editor of Variant Perception and co-author with John Mauldin of Endgame: The End of the Debt Supercyle…
A thirteen point guide to breaking up the euro.
Those countries that opt to remain in the euro will,
That’s not a bazooka…
*This* is a bazooka.
Not a €2,000bn bazooka… a €5,000bn bazooka to repair the eurozone, according to Peter Boone and Simon Johnson, writing for the Peterson Institute where they are both fellows.
Collateral squeeze as strong as ever, Icap says
Oh dear. So much for the big Draghi LTRO helping out the Eurozone collateral crunch.
According to Icap’s latest repo makret report — and remember they operate the dominant electronic repo platform in Europe,
This crude old eurozone crisis
Bank of America Merrill Lynch’s commodities analysts have picked up that Brent crude — when priced in euros — is uncomfortably close to its July 2008 peak.
And they’ve added some interesting points:
Spain and Italy: only just begun
So Thursday morning’s auctions of Spanish bonds and Italian one-year T-bills went well, and on Friday there’s an Italian bond auction for up to €4.75bn.
The Spanish sale was especially impressive — from the FT earlier,
Debunking the 7 per cent threshold
Spain and Italy successfully auctioned short-term debt this morning, a result that some say was the result of funds raised at the ECB’s three-year LTRO being put to work.
It wasn’t just the short-end of the government curves that got a boost,
On the prospects for Valencia
On Wednesday it transpired that the Spanish region of Valencia had delayed repaying Deutsche Bank a €123m debt by as much as a week.
According to the WSJ, a payment was only achieved in the end because Spain’s central government convinced an unnamed bank to step in with a vital short-term bridging loan.
Viva Espana [updated]
The Spanish auction results are out…
RTRS -SPAIN SELLS EU5.64 BLN OF BILLS VS MAXIMUM TARGET OF EU4.5 BLN
RTRS-SPAIN SAYS 3-MONTH BILL AVERAGE YIELD 1.735 PCT VS 5.110 PCT AT PREVIOUS AUCTION
RTRS-SPAIN SAYS 6-MONTH BILL AVERAGE YIELD 2.435 PCT VS 5.227 PCT AT PREVIOUS AUCTION
…
Terminado del forebearance
Here’s an interesting exercise from Fitch — they’ve counted up 8,235 properties which were repossessed in Spanish RMBS that they rated.
These are some of their findings:
Average 43% Value Depreciation:
How big could the Sarko trade go?
Some €15-45bn for Spanish banks and their government’s bonds at least, according to Morgan Stanley’s Huw Van Steenis, who has just produced a very interesting note on the carry trade du jour – or to use its technical name the ECB’s 3-year LTRO.
Prepare for the 3-year LTRO
Well, it’s the only explanation we can come up with for this morning’s up-sized Spanish bond auction.
The government had been looking to sell up to €3.5bn of paper, but ended up knocking out almost €6bn.
Strong demand for Spanish debt [updated]
No, really there is.
Via Reuters on Thursday.
RTRS-SPAIN 2015 BOND AVERAGE YIELD 5.187 PCT (LAST AUCTION 3.639 PCT)
RTRS-SPAIN 2016 BOND AVERAGE YIELD 5.276 PCT
RTRS-SPAIN 2017 BOND AVERAGE YIELD
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
Spain pays 5.1% for three month money
There was a rather concerning auction of Spanish bills on Tuesday morning. Rarely does the front-end of the curve get this much attention.
Via Reuters:
RTRS-SPAIN SAYS 3-MONTH BILL AVERAGE YIELD 5.110
Looking at the eurozone through a NIIP prism
Whichever way you look at it, the eurozone crisis is ugly.
But looking at the overall indebtedness of peripheral economies instead of focusing solely on their public sector debt offers an interesting perspective on the problem,
Mariano Rajoy – Europe’s quarterback
Europeans tend not to understand American football, not least because the ‘ball’ seems to rarely make contact with the ‘foot’.
But let’s hope Mariano Rajoy, the candidate expected to win Spain’s general election on Sunday,
Dios mío! – redux
Oh dear.
Oh dear, oh dear.
Oh dear, oh dear, oh dear.
Dios mío!
As soon as one fire is put out partly extinguished…
Related link:
“November 2011… the month bond yields entered – Markit
Another day, another Italian bond auction
Breaking on Monday morning…
RTRS-ITALY HAD TARGETED AMOUNT OF BETWEEN 1.5 BLN AND 3 BLN EUROS AT 5-YR BTP AUCTION
RTRS-ITALY 5-YR BTP AUCTION GROSS YIELD SETS NEW EURO LIFETIME HIGH, UP FROM 5.3 PCT AT MID-OCT.
Bazooka with cheese
Where would financiers be without metaphors? Let’s take Citi as an example — although we are sure there are worse offenders.
In Tuesday’s FT, Citi’s chief economist, Willem Buiter, called for a bigger ‘bazooka’ to boost the firepower of the EFSF.
Building a better bank recap, discount curve edition
At some point on Wednesday, eurozone governments will say they want banks to find an unspecified amount capital, based on revised sovereign haircuts which… we still don’t know a lot about.
We know that sovereign bond positions will be marked down,
Yes, we have no bazookas (but maybe Bradys?)
We definitely don’t have a bazooka, because we have a rubbish balance sheet.
We know the EFSF insuring sovereign debt has huge capital and also sovereign correlation risk. Basically not enough capital and way too much correlation wrong-way risk between this capital and the fund guarantors.