Deja Vue All Over Again; ECB Says Bond Buying Program Available; Sweet Talkin' Guys

"ECB Says Bond-Buying Program Available

The ECB went from loading up on sovereign debt and making a huge mess of it when Greece defaulted, to the LTRO program which has not made a big mess yet but will. Things are about to go full-circle as the ECB threatens once again to make another mess of things with sovereign bond purchases.

The Bundesbank, Germany's central bank protested bond purchases the last time (correctly), and will do so again, likely to no avail, and with the same predictable results.

CNBC reports ECB Official Says Bond-Buying Program Available

ECB Executive Board member Benoit Coeure, the ECB board member in charge of market operations, said the central bank still had the Securities Market program (SMP) in place allowing it to purchase debt of euro zone nations, should the need arise.

"We are seeing today growing signs of normalization on a whole group of market segments ... but the situation in recent days shows that this normalization remains fragile," Coeure told a conference in Paris.

Referring to Spain, where sovereign debt yields have spiked amid concerns over the government's ability to cut its deficit, Coeure said: "The political will is there, which makes me think that what is happening at the moment in the market does not reflect the fundamentals."

at  http://globaleconomicanalysis.blogspot.com/2012/04/deja-vue-all-over-again-ecb-says-bond.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29

European Bailout Stigma Shifts From Banks To Sovereigns As Bundesbank Refuses PIG Collateral

"Back in early February, the ECB's Margio Draghi told a naive world when discussing the implication of taking LTRO bailout aid, that “There is no stigma whatsoever on these facilities." We accused him of lying. Additionally, we also suggested to put one's money where Draghi's lies are, and to go long non-LTRO banks, while shorting LTRO recipients. In two short months the spread on that trade has doubled...



... which intuitively is not surprising: after all, as a former Goldmanite (and according to some - current), Draghi is merely treating Europe's taxpayers like the muppets they are. As such, fading anything he says should come as naturally as Stolpering each and every FX trade. Yet what that little incident shows is that despite all their attempts otherwise, the central planners can not contain every single natural consequences of their artificial and destructive actions. Today, we see learn that the same Stigma we warned about, and that Draghi said does not exist, is starting to spread away from just the bailed out banks (becuase we now know that the LTRO was merely a QE-like bailout of several insolvent Italian and Spanish banks), and to sovereigns. From Bloomberg: "Germany’s Bundesbank is the first of the 17 euro-area central banks to refuse to accept as collateral bank bonds guaranteed by member states receiving aid from the European Union and the International Monetary Fund, Frankfurter Allgemeine Zeitung reported." And where Buba goes, everyone else is soon to follow. And what happens then? Since it is inevitable that Spain and Italy will be next on the bailout wagon, what happens when over $2 trillion in bonds suddenly become ineligible for cash collateral from the only solvent central bank in the world (aside for that modest, little TARGET2 issue of course). Will it force the ECB to be ever more lenient with collateral, and how long until the plebs finally realize that the ECB has been doing nothing but outright printing in the past 5 months? What happens to inflationary expectations then?..."

at http://www.zerohedge.com/news/european-bailout-stigma-shifts-banks-sovereigns-bundesbank-refuses-pig-collateral