"When yesterday we
presented the view from CLSA's Chris Wood that the February 29 LTRO could be
€1 Trillion (compared to under €500 billion for the December 21 iteration), we
snickered, although we knew quite well that the market response, in stocks and
gold, today would be precisely as has transpired. However, after reading the
report by Credit Suisse's William Porter, we no longer assign a trivial
probability to some ridiculous amount hitting the headlines early in the morning
on February 29. Why? Because from this moment on, the market will no longer be
preoccupied with a €1 trillion LTRO number as the potential headline, one which
in itself would be sufficient to send the Euro tumbling, the USD surging, and
provoking an immediate in kind response from the Fed. Instead, the new
'possible' number is just a "little" higher, which intuitively would make sense.
After all both S&P
and now Fitch
expect Greece to default on March 20 (just to have the event somewhat
"priced in"). Which means that in an attempt to front-run the unprecedented
liquidity scramble that will certainly result as nobody has any idea
what would happen should Greece default in an orderly fashion, let alone
disorderly, the only buffer is having cash. Lots of it. A shock and awe
liquidity firewall that will leave everyone stunned. How much. According
to Credit Suisse the new LTRO number could be up to a gargantuan, and
unprecedented, €10 TRILLION!
Here is how the strawman is now put in place for what may the biggest liquidity injection in modern history in just under two months.
Here is how the strawman is now put in place for what may the biggest liquidity injection in modern history in just under two months.
February’s second 3-year LTRO looks set to be extremely large. Really extravagant claims (we have heard reports of €10 tn) are probably wide of the mark because this will not be a complete collateral free-for-all (unless NCBs choose to make it so, which for some of them is admittedly an open question; again, see rational player section below). But the idea of path-finder lightning springs to mind (High-speed cameras reveal that lightning evolves “bang BANG”, essentially); the last LTRO has removed any stigma, making managements who do not exploit the value on offer arguably careless at best. This is, on the face of it, very cheap protection indeed against any possibility of a liquidity crisis for three years..."at http://www.zerohedge.com/news/10-trillion-ltro-coming-credit-suisse-hunkers-down-ahead-european-endgame?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29
