Posts tagged 'SMP'

Eurozone liquidity is getting tight

Icap’s Chris Clark alerts us on Friday to the fact that European liquidity markets are already preparing themselves for a potential liquidity squeeze come the end of the year.

As he notes:

Month-ends have become increasingly significant events for the Eurozone repo markets over the second half of this year as levels of excess liquidity have diminished and market rates have slowly edged higher. This Thanksgivings Day/November month-end liquidity hump has proved a tricky one for the market to manoeuvre, but already attention is focusing on the impending year-end as evidence stacks up to suggest funding might be problematic for some.

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ECB transparency, €100bn of Italian bonds edition

Click to enlarge — details (finally) of the sovereign bonds held by the European Central Bank’s inactive Securities Markets Programme, released on ThursdayRead more

Seniority, the SMP, and the OMT

“Was today the day that the Portuguese PSI began?,” Macro Man asks, of the OMT.

They’re noting something curious about ECB seniority in light of Thursday’s revelations about the OMT. The ‘technical features’ confirm that the OMT will receive equal treatment with ordinary bondholders if a eurozone sovereign restructures its debt. But, in the Q&A, Draghi also confirmed that the old SMP bond holdings will remain senior. It will be first in the queue, ahead of bondholders and the OMT. Read more

Spain’s funding costs post a Draghi-ing

So, we are days from finding out what the ECB is planning to do… or at least, days away from knowing more than we do now.

But immediate largesse in the bond market isn’t the only bit of help that should be concentrated on. There is still Spain’s bank-bailout to consider and where its costs should ultimately lieRead more

As the old SMP passes into history…

A reminder of why the ECB’s promise to “address” seniority in its new bond purchases matters so much (click to enlarge):

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Studies in pre-commitmentphobia: the case of the ECB

‘We’re not done yet, but we’re working on it’, a rather annoyed-looking ECB present Mario Draghi more or less told the public after the last meeting of the Governing Council. The piece of work in question was, of course, the planned intervention to support government bond markets conditional upon ailing sovereigns being part of a formal bailout. (Here’s looking at you, Spain.)

The lack of detail initially underwhelmed markets that had expectations for greater granularity around the action plan. That eventually reversed, possibly when people realised what Draghi said was actually pretty daring when measured by the ECB’s own standards and stated mandate. Read more

ECB bond buying halted after eurozone debt rally

The European Central Bank’s government bond purchases came to a halt last week for the first time since August in a sign the emergency debt buying programme is being wound down, reports the FT. The ECB’s inactivity reflects improved market conditions, which have been aided by the central bank’s three-year liquidity operation in December that averted a credit crunch in the eurozone. The ECB has more or less frozen the programme in the past few weeks after eurozone bonds have seen a sharp rally following the offer of three-year loans to the region’s banks on December 8.

ECB seniority and dirty hands

First, do read Dan Davies’ bailout options post if you haven’t already. It’s like a Greek Kobayashi Maru. Except you have no hope of ending up like James T Kirk. We got to number 5.

But speaking of Greek debt situations where there are no good outcomes left… Read more

Covert transfers and the SMP

We are indebted to Marc Ostwald of Monument Securities for this:

AMSTERDAM, Dec 20 (Reuters) – The Dutch central bank cancelled its interim dividend, thereby increasing the government’s budget deficit, saying it may make a loss in 2011 due to the European Central Bank’s bond buying programme, the Dutch Finance Minister said on Tuesday. Read more

SMP sterilization *fail*


We will look at what, if anything, this means a bit later. But there’s already plenty of theories flying around the interweb. Read more

Something for the bail-out sceptics

We won’t know until early next year how much the ECB has spent on its efforts to defend Italy and Spain facilitate the transmission of monetary policy across the Eurozone.

However, Gary Jenkins at Evolution Securities has crunched some numbers and he reckons the bank is now sitting on up to €100bn of Italian debt alone. Read more

Yes, we have no ECB bond-targeting

We have a mandate and we have to stick to our mandate. Fixing an interest rate for a country is certainly not compatible with our mandate. You would guarantee a certain refinancing cost for a government and you could not argue that this was not monetary financing.

The stated purpose of the SMP is to cope with dysfunctional markets and it’s not to ensure a specific spread for a specific country.

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Outlining scenarios for the ECB’s bond buying

The problem confronting the eurozone is one of asymmetry and non-linear risks.

So says Nomura in a research note sent to clients on Thursday. Asymmetry between a country like Italy and a country like France, with only the ECB in between. Read more

The ECB and covered bonds – the next chapter?

The ECB is considering having another go at supporting the $1.58tr eurozone covered bond market.

Now, the last time the ECB entered this market, things didn’t go exactly to plan, as the graph below from Barclays Capital demonstrates.

Siemens in knots

Oh no no, of course we didn’t take cash out of a French bank!


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The man who bought too much?

(Reuters) – ECB Executive Board Member Juergen Stark will step down from his post because of a conflict over the central bank’s controversial bond-buying programme, two sources told Reuters on Friday.

(ECB had no comment to Reuters. Quick question. Does this make bond buying more likely if he leaves and isn’t around to object, or does it make it less likely as conflicts spring out into the open?) Read more

The difference of five billion euros [updated]

Update 1435 UK time: The number’s in and it’s €22bn, which takes the total for all ECB bond purchases to €96bn. Again, watch those sterilisation numbers (bid rate, total size of bid, etc). Related fact du jour — the ECB liquidity surplus currently stands at €160bn based on the lending operations that took place in August, according to Barclays Capital. At its biggest in over a year.

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Sterilising Silvio

(More salubrious title: did the ECB just rescue Italy from a liquidity trap, or keep it there?)

Key points: Read more

ECB sighted

Seems the ECB has bought five-year bonds in both Italy and Spain, pushing yields on both down about 60bps to below 5 per cent. Huge moves in ten-year bonds. A great day for scared longs to offload…

Italian to be next ECB president


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Trichet – the verdict

We already know what the markets made of Thursday’s moves by the ECB to try and halt the contagion in the eurozone from spreading.

Here’s the verdict from the sell side. Think moving with the handbrake on. Read more

Scraping the bond-buying barrel

We almost feel embarrassed for the European Central Bank. Almost. Its reputation for applying constructive ambiguity in the service of deploying immense firepower is under severe pressure anyway.

A short time ago, right in the middle of President Trichet’s press conference, the ECB had apparently begun buying (or the very least checking prices for) Irish and Portuguese bonds. Not Italian or Spanish bonds so far as we know, even if it seems that trading in shorter-dated Italian debt became very volatile, apparently in anticipation of orders from the ECB. Read more

Trichet, you’re our only hope [updated]

BRUSSELS(Dow Jones)–Euro-zone governments have begun discussing a change to their permanent sovereign rescue fund that could raise the currency bloc’s total rescue loan capacity to nearly EUR1 trillion, a senior euro-zone official said. Read more

No, the ECB can’t prop up Italy

We won’t know if it really did happen, not until next week’s figures on Securities Markets Programme purchases. (Current total: €74bn)

But since there was plenty of rumour on Tuesday that the European Central Bank (via the Bank of Italy) intervened to buy Italian bonds from a terrified secondary market, mind if we point something out in the interim? Read more

ECB bond-buying, 2010-2011: in memoriam

There is no body, but we fear the Securities Market Programme (current holdings: €75bn) has been killed off.

Something to inscribe on the tombstone: Read more

The usual Portuguese bond gyrations

Rumours flew in the market on Friday that the ECB was back to buying Portuguese government bonds.

Well, if they did, and managed to push down Portugal’s sky-high yields for a bit, it appears the yields promptly fought back: Read more

Return of the ECB bond purchases…

After a two-week hiatus, the European Central Bank is back; reportedly intervening to buy up Portugese bonds on Thursday after yields on the Club Med debt surged.

A conspicuously absent ECB

What can one read into the fact that the European Central Bank suspended its purchases of (mostly peripheral) eurozone government bonds last week?

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What fresh basis the ECB hath wrought – yet again

Did ya know?

The European Central Bank — via its Securities Markets Programme — now owns almost 20 per cent of the outstanding government bonds of Greece, Ireland and Portugal. Read more

Portugal bond-buying estimates du jour

From a Goldman ‘one year on’ note on the euro crisis on Thursday (emphasis ours):

While the pros and cons of external technical assistance (and a break from market funding) are being debated, the ECB remains the main buyer of Portuguese government securities. Of the latter, more than three-quarters were held by residents of other EMU member countries (mostly financial institutions) at the outset of the crisis.

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