"Regarding the recent coordinated central bank moves, the key take-away point
is that the ECB and US Federal Reserve attempted “shock and awe” tactics with
their latest announcements by throwing out words such as “unlimited” and
“open-ended.”
The implication here was that the Central Banks would do everything
they could to prop up the financial markets. However, as has been the case with
every Central Bank intervention, there are unintended consequences.
The first unintended consequence concerns the fact that both programs are
essentially a form of “intervention to infinite.” The problem with this is that
the primary driver of stock prices over the last three years has been the
anticipation of more monetary stimulus from Central Banks.
Indeed, the New York Fed itself has openly admitted that were it to remove
the market moves that occurred around Fed FOMC meetings (the times when the Fed
announced new programs or hinted at doing so), the S&P 500 would be at 600
today.
So, by announcing programs that will be on going in nature, both the
ECB and the Fed have removed the anticipation of future Central Bank
intervention from investors’ psychologies. This could become highly problematic,
especially if these latest announcements turn out to be duds.
Speaking of which…
Spain’s ten-year bond yield has broken back above 6%. To see Spain’s
sovereign bond yields rising like this after the ECB announced it would
essentially provide “unlimited” buying as support is simply stunning. Why would
Spain be imploding like this when the ECB announced it would do everything
possible to keep Spanish bond yields low?..."
at http://www.zerohedge.com/contributed/2012-09-27/spain-bank-run-combined-sovereign-debt-crisis
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