The power of the ECB’s 3-yr LTRO program was in full force today as the Spanish 3-month BILL AUCTION provided the spark to ignite the kindling of the massive amount of liquidity provided to the banks via the LONG-TERM REFINANCING OPERATION. This has not been a secret as we have repeatedly discussed how the 2/10 YIELD CURVES HAVE RECENTLY GONE FROM INVERTED TO POSITIVELY SLOPED. The move has been so dramatic that the Italian and Spanish curves are almost the same as the German. Bloomberg had the closes on the Italian at +164, the Spanish at +172 and the German at +174. This movement is quite dramatic and the Spanish auction today merely confirmed the power of the recent ECB action.
Posts Tagged ‘Treasuries’
Notes From Underground: The Europeans delivered on a bailout of the Peripherals (Maybe So, Maybe Not)July 21, 2011
After reading through the vast amount of news on the Brussels “emergency” meeting, I am not sure I truly understand what the final outcome of the European resolutions for financial stability entail. There are bond swaps on Greek debt, which will mean a soft default, and then there is an increase in the size of the EFSF funding and a move to allow the buying of secondary sovereign bonds. Again, it is not so easily to understand at this juncture as so much contradictory information is being provided that the final agreement doesn’t appear at this time.
In Monday’s Financial Times there is a column by Lawrence Summers, the GODFATHER of U.S. economic policy. Mr. Summers offers the Europeans a great deal of advice on “HOW TO SAVE THE EUROZONE IN THE COMING CRITICAL WEEKS.” The article is actually a good policy prospective if there was not the issue of politics that play a large and important role in the EU‘s inability to resolve its fiscal difficulties. Summers wants to believe that the EUROCRATS have the political mandate to negotiate Brussel’s desire for a peaceful, state-supported EDEN of entitlements.
Notes From Underground: Hey Mr.Bernanke and/FED–GOD GAVE YOU TWO EARS and ONE MOUTH SO LISTEN MORE AND SPEAK LESS!April 14, 2011
The news out of Europe today was not favorable for Greece as it was reported in the German paper DIE WELT that German Finance Minister Wolfgang Schäuble suggested Greece would need to restructure. Schäuble’s comments led the cost of interest rate on the DEBT of the peripherals to rise. By day’s end, Greek 2-year rates climbed to 16.8 percent. Portugal rose 25 basis points to 8.87 percent and Ireland increased 25 basis points to 8.20 percent. Spain’s bonds were also priced higher as rates increased 10 basis points. All in all, not a very splendid day for the European debt-stressed nations, but yet again the DOLLAR could not gain ground against the EURO as an initial DOLLAR rally faded quickly. It appears that some central banks are recalibrating reserves as even a DOLLAR rally seems to be so short-lived. The EURO has performed well even though it has the cloud of uncertainty overhanging its economic and political situation.
Notes From Underground: MIlton Friedman was wrong about free lunch–Ben Bernanke had it at the National Press ClubFebruary 3, 2011
Today, the main story was the address that Chairman Bernanke delivered to the National Press Club as his topic was the, “The Economic Outlook and Macroeconomic Policy.” The FED Chairman’s speech was a “redo” of Mervyn King’s speech 10 days ago. It seems that the FED is adhering to the same view as the BOE, in that the FED will stay the course on QE and its present monetary policy. Inflation is not a problem even though some highly visible price increases have taken place in some commodities but that is due to the growing demand from the emerging economies. Core inflation was “only 0.7 percent in 2010″ and wage growth is non-existent, so there is no worry on the inflation front.
The markets were riddled with all sorts of political news today as North Korea felt neglected and found a way to move center stage. The North Koreans like to have the spotlight shine on them when they need something from the world. I figure they must need food and heating oil for the winter so they upped the tension on the PENINSULA by lobbing some artillery shells into a South Korean military exercise. It is sad that SOUTH KOREANS had to die while Pyonyang played their typical games. A boycott of the North cannot work as the corrupt dictatorship just raises the temperature on hostilities until the world provides them with what they want and need. It is time to start bringing the U.S. troops home. Let the Chinese and Koreas resolve the problems that result from the arrested development of the North Koreans. Let the South Koreans be under the U.S. NUCLEAR UMBRELLA and start cutting back on U.S. global overreach. Oh by the way, don’t forget the bread and the heating oil so the North can get on with its goal of sucking the life out of its “citizens.”
Another FED meeting and another day when the parsers of FED SPEAK get to dissect the nuances that the media uses to fill the void of that vapid wasteland. The current rally in the EQUITY markets will give the FED Board of Governors the needed cover to maintain the extended period language and appear that it is above politics.
First things first: The Japanese Central Bank did in fact hold an emergency meeting Sunday. The market’s initial reaction was to sell the YEN. But the market was disappointed when the BOJ and MOF trotted out the same old, tired plans for stimulus at a press conference. There would be no intervention to halt the YEN appreciation, thus the market reversed the YEN selling and the DOLLAR was sold off by 150 pips. All the YEN crosses also reversed–the market punished the Japanese for TALKING LOUDLY AND CARRYING A LITTLE STICK. Moral of the story for Finance Minister NODA and MOF GOVERNOR SHIRAKAWA: Like a groom on the honeymoon, don’t promise more then you can deliver.