What a
set-up today. Earlier, we had reports that the ‘bank jog’ in Greece is showing signs of turning into a
full-blown run on banks. The political leaders had for the first time
acknowledged that Greece could, in fact, leave euro. Greece had difficulties forming a
government, and the Eurogroup meeting was adamant that Greece has to conform to the austerity
program. Then...
Then separate
news cause a panic in the markets – first rumors of LTRO, then Mr. Draghi , for
the first time, states that Greece can leave the euro, if it wants to. The
headlines that EFSF and ECB seem to have trouble coordinating payments to Greece go unnoticed. The announcement hits
the screens: ECB is stopping providing liquidity to Greek banks. The obvious
conclusion is that Greece is now kicked out of the currency
union by closing the TARGET2-channel. Slowly markets understand that this is
not the case and ELA funding can keep the banks running for now.
Markets know
that ELA requires deposits at the recipient banks and thus has its limits in
the current environment, so everyone gets scared again. Then Mario &
friends announce that the fund transfers to banks will happen ‘soon’.
I have a
strange feeling about this. Perhaps markets are in an overdrive, as we are in a
truly critical moment of the crisis. Perhaps the eurocrats just blundered and
did not coordinate their efforts that well today, causing plenty of risk-on,
risk-off movement. Maybe they are just putting pressure on the Greeks ahead of
the elections so that they can have full adherence to the Troika’s program in
the medium term.
Or maybe
they are pushing for the bank jog in Greece to turn into a full-blown bank run,
in order to force Greece out of the union.
Today, a
dedicated section on the Europe’s “Wild Ride”. Unless you want to understand what the hell happened
today, skip that section (but read the last one there from alphaville). Remember to follow ‘MoreLiver’ on Twitter and Facebook, and I just updated the JP Morgan Losses post.
News – Between
The Hedges
Markets – Between
The Hedges
Recap –
Global Macro Trading
The Closer
– alphaville / FT
Market
Commentary – A
View From My Screens
Tyler’s European Summary – ZH
European
Banks Battered As Reality Sets In
Tyler’s US Summary – ZH
Deja
LOL As Financials Continue To Plunge
Debt
crisis: live – The
Telegraph
The Euro
Crisis Blog – WSJ
FX Options
Analytics – Saxo
Bank
European
10yr Yields and Spreads – MTS indices
EURO CRISIS: GENERAL
Thinking the Unthinkable – Kotok /
The Big Picture
All that has changed. The unthinkable has
occurred. We now have DIvergence instead of CONvergence. We now have
DISintegration instead of Integration. The Eurozone is coming apart.
The Eurozone was never designed to cope with
millions of Spaniards moving their money out of the country, behaving like
middle-class Venezuelans with offshore accounts in Miami. And it also was
never designed to cope with capital controls. But increasingly, it looks like
we’re going to end up with one or the other. Or both.
Going, going, gone? – Free
exchange / The Economist
Most of
finance is built on confidence. By fearing moral hazard, European leaders have
destroyed confidence.
Merkel-Hollande Meeting Yields Greece Growth Signal – BB
And this is why the markets turned earlier today.
And this is why the markets turned earlier today.
Merkel, Hollande promise joint growth strategy – Reuters
New French President Francois Hollande and
German Chancellor Angela Merkel acknowledged differences on Tuesday over how to
boost growth in recession-plagued Europe, but pledged to forge a joint approach in time for an EU summit next
month.
ECB steps into banking sector reform – Cinco
Días
"The ECB will carry out an audit of the
Spanish banking sector," Cinco Dias reports. The European Central Bank
decided to "cooperate with the government" in the reform of the
Spanish banking system, especially concerning the valuation of assets and the
creation of a "bad bank" charged with liquidating toxic real estate
assets.
David Cameron: Eurozone should 'make up or
break up' – The
Telegraph
David Cameron has told eurozone countries they
must choose whether to “make up” or “break up” in his bleakest warning so far
on the debt crisis.
EURO CRISIS: GREECE
How Greece could get itself kicked out of the
euro (without even trying) – Wonkblog
/ WP
But at some point the ECB may just decide it’s not worth pouring endless euros into rickety banks in an unstable country that might leave anyway…So at a certain point, Greece could face a situation in which it no longer has enough euros for its day-to-day operations…At that point, the country would have no choice but to leave the euro.
But at some point the ECB may just decide it’s not worth pouring endless euros into rickety banks in an unstable country that might leave anyway…So at a certain point, Greece could face a situation in which it no longer has enough euros for its day-to-day operations…At that point, the country would have no choice but to leave the euro.
If Greece defaults on its debts it is a $1.3
trillion dollar number, forget the drivel that you read in the press because it
will not just be the sovereign debt but the municipal debt, the derivatives,
the bank debt, the corporate debt and all of the obligations of the country
that will fall into the sinkhole of no return.
What Happens If Greek Payments Stop: Thought
Experiment On "The Day After" – ZH
Goldman Sachs: There is no automatic relationship that could force the ECB to stop the flow of liquidity to Greek banks at that point. Rather, the ECB will have to take a set of key decisions:
Goldman Sachs: There is no automatic relationship that could force the ECB to stop the flow of liquidity to Greek banks at that point. Rather, the ECB will have to take a set of key decisions:
If Greece Quits Euro, Its Ruin Will Be
Pointless – View
/ BB
The crucial innovations that Germany and its allies in austerity have resisted so far -- jointly guaranteed euro bonds, and the ECB as a lender of last resort for distressed sovereign borrowers -- would have to be adopted. The measures that would have stopped things ever getting this bad would finally have to be taken up.
The crucial innovations that Germany and its allies in austerity have resisted so far -- jointly guaranteed euro bonds, and the ECB as a lender of last resort for distressed sovereign borrowers -- would have to be adopted. The measures that would have stopped things ever getting this bad would finally have to be taken up.
Utilizing the threat of bank runs does take
euro area brinkmanship to a dangerous new level. Euro area leaders should think
carefully about proceeding down this road. It should only be contemplated if
euro area leaders are willing to proceed to pan-euro area bank deposit
insurance and other dramatic integration measures to avoid the spread of
contagion and bank runs to other member states. If they are prepared to do so,
they can call Alexis Tsipras’ bluff by fomenting a bank run in Greece before the new elections
are held.
Richard Parker, who advised George Papandreou,
the nation's leader until late last year, said the government investigated the
prospect of exiting the single currency in some depth even in the early stages
of the crisis. Until now, the country has steadfastly denied that it ever
contemplated leaving the euro.
Capital Flight From Greece Accelerates, €5bn in
May, Exodus Even Hits Time Deposits; Fed, ECB, BOE, BOJ Balance Sheet
Comparison – Mish’s
EURO CRISIS: TODAY’S WILD RIDE
5.000
policemen, 30.000 protestors. Union of the willing?
Rumor Time: Stocks, EUR Surge On Renewed LTRO 3
Speculation – ZH
ECB Said to Stick to Current Crisis Stance as
Tools Reviewed – BB
Greek Banks Wait on EU Approval for Capital
Boost, Imerisia Says
– BB
ECB Stops Monetary Policy Operations To Some
Greek Banks – ZH
Euro Erases Gain on Report ECB Halts Actions
With Greek Banks – BB
Euro Drops After ‘Major Confusion’ Regarding
Greek Bank Operations
– MarketBeat
/ WSJ
Shifting ECB liquidity to ELA, Greek bank
recap edition – alphaville
/ FT
The really important point to end on is that as
soon as the EFSF bonds are transferred over (hopefully Wednesday’s misconstrued
mess will focus a few bureaucratic minds), these Greek banks can go back to
pledging the EFSF collateral at normal ECB ops. The brief spell in ELA ends.
Incidentally, these brief switches in and out of ELA have also taken place in
Irish banks and in Dexia when collateral requirements shifted against banks a
few times, only to shift back later. World didn’t end then.
 |
| Twist ending and selling off. More to come? Source: dshort |
OTHER
Factors Institutional Investors Are Favoring – The
Big Picture
Every year since 1989, Merrill Lynch surveys a
few 100 institutional investors using a broad variety of quantitative,
valuation, process and modeling questions. Their responses get summarized in a
39 chart, 27 page report.
Hitchhiker’s Guide To The ETF Galaxy – ETFdb
Three Charts On Why This Time Is 'Not'
Different For Stocks
– ZH
The ultimate Facebook IPO linkfest: part one – Abnormal
Returns