[Trampa501]

Spanish auction results

So perhaps the Euro isn't going to pull apart? Who's buying all the debt though? Germany in secret? Russia? China? Dave's mates in the City?

Seems to me there's a lot we aren't being told.

[The Masked Tulip]

Me!

[blackgoose]

ECB.

[Fishman]

Trampa501, on 13 December 2011 - 10:24 AM, said:

Spanish auction results

So perhaps the Euro isn't going to pull apart? Who's buying all the debt though? Germany in secret? Russia? China? Dave's mates in the City?

Seems to me there's a lot we aren't being told.

Taken from the same web-site:

ECB Allots E41.15 Bln In 35-Day Refis At Fixed Rate Of 1.0%

FRANKFURT (MNI) – The European Central Bank Tuesday allotted
E41.1503 billion in 35-day refinancing agreements (refis) at a fixed
rate of 1.0% in an effort to improve the overall liquidity position of
the euro area banking system.

The operation, which had no pre-set amount, attracted 42 bidders.
The refis will settle tomorrow and will expire on January 18, 2012.


Is it this simple? Borrow €1b @ 1% from the ECB for 35 days and keep rolling the debt over until Dec 2012.
Buy 12 month Spanish bonds at 4% and book a 12 month profit of €30m ?

Any jobs going ?

This post has been edited by Fishman: 13 December 2011 - 10:46 AM

[rxe]

Quote

So perhaps the Euro isn't going to pull apart? Who's buying all the debt though? Germany in secret? Russia? China? Dave's mates in the City?

Yes, ECB, but not directly.

A bank buys a billion of these at 4%.
They then drive straight over to the ECB and deposit these as collateral on a loan at 2%.
Instant 2% profit, and it is a wonderfully risk free trade for the bank. If the euro explodes, then their obligations and their assets are matched.

In terms of outcomes:

- The Spanish get funded (politicians happy)
- The ECB aren't buying directly (politicians happy)
- We pay the banks the turn on the deal (taxpayers too stupid to be happy or sad)

Edit - I see from the post above that the ECB are offering 1% - so 3% profit! Simples!

This post has been edited by rxe: 13 December 2011 - 10:50 AM

[leicestersq]

rxe, on 13 December 2011 - 10:49 AM, said:

Yes, ECB, but not directly.

A bank buys a billion of these at 4%.
They then drive straight over to the ECB and deposit these as collateral on a loan at 2%.
Instant 2% profit, and it is a wonderfully risk free trade for the bank. If the euro explodes, then their obligations and their assets are matched.

In terms of outcomes:

- The Spanish get funded (politicians happy)
- The ECB aren't buying directly (politicians happy)
- We pay the banks the turn on the deal (taxpayers too stupid to be happy or sad)

Edit - I see from the post above that the ECB are offering 1% - so 3% profit! Simples!

It is indeed free money for the bank, but who is paying? What the ECB has discovered is that by creating new money, all of the banking systems ills are cured. All that bond buying and cheap loans seem to solve everything.

Truth is, they have crossed the rubicon. They ECB are doing what they said that they wouldnt do, and are printing new money. Lets see how good they are at keeping all of that printing under control.

[Vested Disinterest]

Is it a dead cert that the 1% ECB loans can be rolled over month by month?

[FreeTrader]

Vested Disinterest, on 13 December 2011 - 11:51 AM, said:

Is it a dead cert that the 1% ECB loans can be rolled over month by month?

They won't have to.

Next week sees the first of the ECB's recently announced Longer-Term Refinancing Operations. These will give loans to banks for three years.

http://www.ecb.int/p...11208_1.en.html

[interestrateripoff]

Fantastic news building more risk into a system that's already too big to save.

Ludwig von Mises describes the endgame brought on by reckless expansion of credit: "There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved."

[LiveAndLetBuy]

Trampa501, on 13 December 2011 - 10:24 AM, said:

Spanish auction results

So perhaps the Euro isn't going to pull apart? Who's buying all the debt though? Germany in secret? Russia? China? Dave's mates in the City?

Seems to me there's a lot we aren't being told.

Those were 1 year bonds.

Different story with the 10 year bonds which were over 6% at one point:

http://www.ft.com/in...l#axzz1gPDJy3RK

[Bloo Loo]

rxe, on 13 December 2011 - 10:49 AM, said:

Yes, ECB, but not directly.

A bank buys a billion of these at 4%.
They then drive straight over to the ECB and deposit these as collateral on a loan at 2%.
Instant 2% profit, and it is a wonderfully risk free trade for the bank. If the euro explodes, then their obligations and their assets are matched.

In terms of outcomes:

- The Spanish get funded (politicians happy)
- The ECB aren't buying directly (politicians happy)
- We pay the banks the turn on the deal (taxpayers too stupid to be happy or sad)

Edit - I see from the post above that the ECB are offering 1% - so 3% profit! Simples!

wot...no downside...must do more then...indeed, open it up to everyone to do...Ill take a billion

[Lionel Mandrake]

interestrateripoff, on 13 December 2011 - 12:04 PM, said:

Ludwig von Mises describes the endgame brought on by reckless expansion of credit: "There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved."

Great quote. For anyone who's interested the quote is from Human Action. If you like robot voices you can get it for free as an audio download:

http://mises.org/med...category&ID=139

(end of public service announcement)

[Trampa501]

More Spanish debt being bought up

Spain sells 6B Euros of Bonds

Quote

Spain sold 6.03 billion euros ($7.8 billion) of debt, almost twice the maximum target for the auction, as the strong demand for the securities triggered a rally in the country’s bonds.

Spain auctioned bonds due in 2016 at an average yield of 4.023 percent, compared with 5.276 percent when securities of a similar maturity were offered on Dec. 1, the Treasury said. It priced bonds due in 2020 at 5.239 percent, compared with 5.006 percent in September, and sold an April 2021 bond, the current 10-year benchmark, at 5.545 percent, less than the 5.696 percent on the secondary market before the auction.

After the auction, Spanish bonds erased declines. The yield on the five-year benchmark fell 27 basis points to 4.69 percent with the 10-year yield declining 16 basis points to 5.53 percent, the lowest in more than a week. That narrowed the gap with German equivalents to 359 basis points from as high as 382 basis points before the sale.