World economy talk

[uls]

yes it's good for the banks

they borrow money from the ECB at 1% interest rate then buy sovereign bonds yielding far above 1%

they profit from the spread

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the big amount borrowed isnt exactly positive

it reflects the massive liquidity problem in euro banking system

[Ry_Tower]

^^

market is optimistic about ECB's 3 year LTRO (long term refinancing operation)

euro banks can borrow cheap 3-year money from the ECB

hehe, kaya pala.

Good for banks as long as Spain and Italy bonds yield above 1% then.

[uls]

and even if banks don't buy sovereign debt with the money... the important thing is they're now liquid

half a trillion euros of liquidity was just pumped into the euro banking system... taken up by 523 banks

that should reduce the likelihood of any eurozone bank failure

[Ry_Tower]

and even if banks don't buy sovereign debt with the money... the important thing is they're now liquid

half a trillion euros of liquidity was just pumped into the euro banking system... taken up by 523 banks

that should reduce the likelihood of any eurozone bank failure

How long would this have positive effect on the world market? I remember when the US decided to unload some oil it was just a temporary gain. How would this measure then help EU countries with heavy debts in the long run?

[uls]

it doesnt solve the sovereign debt problem

it only solves the liquidity problem in the euro banking system

how it helps Italy and Spain is create demand for their bonds

[uls]

what did euro banks do with the money they borrowed from the ECB last week?

they deposited the money at the ECB

hehe

Measure of Fear: Banks Bunker Hundreds of Billions in Deposits at ECB - SPIEGEL ONLINE - News - International

In an attempt to jumpstart the interbank market last week, the ECB released nearly €500 billion in liquidity to banks within the euro zone. The custodians of the euro had hoped to strengthen the financial situation of the currency zone's banks with the action. They also hoped that the financial institutions would pass the additional money on to businesses in the form of loans in order to help spur the economy. But instead it appears that a large share of that money has now been parked overnight at the ECB.

ECB Overnight Deposits Reach New High - WSJ.com

FRANKFURT—Use of the European Central Bank's overnight deposit facility reached a new, all-time high Monday, as euro-zone banks parked a growing surfeit of market liquidity in the central bank's safe haven for deposits.

Banks deposited €411.81 billion overnight Monday, up from €346.99 billion deposited overnight Thursday ahead of the Christmas holiday, ECB data showed Tuesday.

right now the priority is to be liquid

banks would rather hoard cash than lend

[Monseratto]

Hmm...isn't that what the US banks did with TARP.

[uls]

that's what US banks did with Fed QE money

they parked the money at the Fed

[uls]

the real goal of the 3-yr LTRO is to strengthen the euro banking system

to prevent bank failures by providing banks with liquidity

the ECB recently lowered collateral standards so banks can dump their low quality collateral at the ECB in exchange for cash

banks then hoard the cash

the ECB's goal is to strengthen the banks... to prepare them for something big... like a sovereign default

the ECB's goal is the save the banks, not the sovereigns

[Monseratto]

Hmm...

The Italian Treasury sold its maximum target of EUR 9 billion of 179-day bills at a rate of 3.251 percent, half of the euro-record 6.504 percent paid in the previous auction held on November 25.

[uls]

Hmm...

here's why




and they say the ECB doesnt do QE

yeah right

[uls]

btw, re Italy's successful 6 mo. t-bill auction... that's just short term debt. even Greece can sell short term debt

the true test is if Italy can sell long term debt

[uls]

as i was saying...

Italian 10-Year Government Bonds Stay Lower as Debt Auctions Miss Target - Bloomberg

Italian 10-Year Government Bonds Stay Lower as Debt Auctions Miss Target
By Paul Dobson - Dec 29, 2011 2:34 AM PT

Italian 10-year bonds stayed lower (GBTPGR10) after the nation raised less than its maximum target at a sale of securities maturing between 2014 and 2022.

The 10-year bond yield climbed 12 basis points to 7.12 percent at 10:33 a.m. London time. Three-year note yields (GBTPGR3) dropped four basis points to 5.83 percent, after earlier sliding as low as 5.68 percent.

Italy sold 7.02 billion euros ($9.05 billion) of debt, compared with a maximum target of 8.5 billion euros, the Treasury said.

[uls]

happy new year

[ame=http://www.youtube.com/watch?v=3LR1mweAxsI]U2 New Year's Day (Studio) - YouTube[/ame]

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good luck Europe

Satyajit Das: The shaky future of Europe

European sovereigns and banks need to find euro 1.9 trillion to refinance maturing debt in 2012. Italy alone requires euro 113 billion in the first quarter and around euro 300 billion over the full year. Given that banks and investors have been steadily reducing their exposures to European countries and banks, the ability to finance this debt is uncertain. The bailout fund and the International Monetary Fund (IMF) with euro 200-250 billion each cannot absorb this issuance.

The only solution available is for European banks to purchase the sovereign debt, which is then pledged as collateral to borrow unlimited funds from the European Central Bank or national central banks. This perpetuates the circular flow of funds with governments supporting banks that are in turn supposed to bail out the government.

[Ry_Tower]

More like scary new year for europe...

[uls]

Brent


WTI

[uls]

UPDATE 1-Iran threatens action if US carrier returns-IRNA | Energy & Oil | Reuters

"Iran will not repeat its warning ... the enemy's carrier has been moved to the Sea of Oman because of our drill. I recommend and emphasise to the American carrier not to return to the Persian Gulf," Salehi told IRNA.

"I advise, recommend and warn them (the Americans) over the return of this carrier to the Persian Gulf because we are not in the habit of warning more than once," the semi-official Fars news agency quoted Salehi as saying.

what carrier?

Dec. 29 (Bloomberg) -- A U.S. navy aircraft carrier, which Iran said it spotted during naval exercises, passed through the Strait of Hormuz on Dec. 27 on routine transit, the U.S. 5th Fleet said.

“The aircraft carrier USS John C. Stennis (CVN 74) and guided-missile cruiser USS Mobile Bay (CG 53) conducted a pre- planned, routine transit through the Strait of Hormuz, Dec. 27,” the U.S. 5th Fleet spokesperson Rebecca Rebarich said in an e-mailed statement in response to questions from Bloomberg News. “USS John C. Stennis is currently operating in the North Arabian Sea to provide air support to Operation Enduring Freedom.”

A U.S. aircraft carrier was spotted in the area where Iran is conducting naval exercises, state-run Islamic Republic News Agency reported today, citing the navy’s Deputy Commander Mahmoud Mousavi. Iran’s navy started the exercises on Dec. 24 and plans to conclude the drills on Jan. 4, the news agency reported.

[uls]

Brent


WTI

[uls]

Italy PM Monti flies to Brussels unexpectedly | Reuters

Italy PM Monti flies to Brussels unexpectedly

ROME | Thu Jan 5, 2012 9:01am EST
Jan 5 (Reuters) - Italian Prime Minister Mario Monti has flown unexpectedly to Brussels, a source in his office said on Wednesday.

[uls]

^^^

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