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.
Click to enlarge — details (finally) of the sovereign bonds held by the European Central Bank’s inactive Securities Markets Programme, released on Thursday: Read more
“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
A reminder of why the ECB’s promise to “address” seniority in its new bond purchases matters so much (click to enlarge):
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.
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
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
*ECB FAILS TO FULLY STERILIZE BOND PURCHASES
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
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
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.
Oh no no, of course we didn’t take cash out of a French bank!
RTRS-SIEMENS BANK SAYS FT REPORT THAT IT TOOK MONEY OUT OF FRENCH BANK AND DEPOSITED IT WITH ECB IS FACTUALLY NOT CORRECT
(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
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.
_________________________ Read more
(More salubrious title: did the ECB just rescue Italy from a liquidity trap, or keep it there?)
Key points: Read more
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…
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
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
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
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
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
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.
What can one read into the fact that the European Central Bank suspended its purchases of (mostly peripheral) eurozone government bonds last week?
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
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.