 |
| Spanish 10y yield, intraday |
ECB came
and went. I guess no-one was expecting unconditional “going nuclear” from
Draghi – but after his speech expectations were very high. Strategy seems
pretty clear and even makes some sense to me. ECB shall perform some SMP in shorter maturities while the ESM
and EFSF shall purchase the longer maturities – but only after an official
request for help has been sent. This is something Italy and Spain do not want to do. There are two explanations:
1) The
politicians in Spataly are scared shitless of getting boatloads of Troika
inspectors looking at the accounts of banks and local governments. This is
because they have stolen billions over the years, and the organized crime
syndicates in both countries are also not happy. Actually, the whole political
elite in both countries is scared. It would be preferable for the other
countries to simply subsidize Spataly by ECB funding, fiscal and banking
unions. Just the money, and no hard questions.
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| Spanish 10y yield, one ye |
2) Same as above, but the politicians are actually worried about their own voters –
forced austerity is not an election-winning strategy. Also, as the countries
think of themselves as too big to fail, they believe they can try to negotiate
for a better deal. Every side is trying to get a better deal, all the time. The
better deal is money from others. The “or else” is the introduction of national
currencies and default on foreign debts.
I try to collect my thoughts and read a lot. Then I'll write something.
For full
coverage of the ECB meeting, see my continuously updated ECB WATCH and remember to scroll to the end for the latest updates.
News – Between
The Hedges
Markets – Between
The Hedges
The Closer
– alphaville / FT
Tyler’s European Summary – ZH
European
Bonds Give Up ALL Draghi "Believe" Gains In Worst Day In Over A Decade
Tyler’s US Summary – ZH
Debt
crisis: live – The
Telegraph
The Euro
Crisis Blog – WSJ
FX Options
Analytics – Saxo
Bank
European
10yr Yields and Spreads – MTS indices
EUROPE
The Thin Blue Line Between Hopium And Reality – ZH
consensus
estimates for 2012 EPS growth have fallen from double digits at the end of last
year to 0.7% currently."
EUROPE: ECB
Press release Monetary policy decisions – ECB
Press conference Mario Draghi: Introductory
statement to the press conference – ECB
Steen's Chronicle: Draghi did not have a Royal
Flush... – Saxo
Bank
It looks like the ECB and FOMC again
overpromised and underdelivered in terms of new action. We do not doubt Draghi
will want to do something, but the Q&A indicated that the split between
Draghi and Club Med vs. Germany/Finland is as big as ever.
What’s the hold up? Germany, perhaps. During a press conference afterwards, ECB vice-president
Vítor Constâncio noted that only one member of the ECB was adamantly opposed to
bond purchases. This seems to be a reference to Germany’s Bundesbank
ECB will do whatever it takes… but it will take
a while to figure out what it is – ASA
But even with lowered expectation, we didn’t
quite expect that.
A Hint From Draghi on the Euro? – Bruce Krasting
What is the one thing that Draghi could do that
would cause energy prices within the Euro Zone to rise? The answer is he could
cheapen the Euro versus the dollar
BNP Furious That Draghi "Jumped The Gun" – ZH
The lack of detail on all the above is a major problem. There were a few more details here and there in the press conference, including the ECB buying in short maturities, but it would have been far better for Mr Draghi to have kept quiet and deliver the "big splash" when there was sufficient agreement to allow the details, and the action, to follow in short order. Expectations should have been much better managed and Mr Draghi's credibility is taking a hit accordingly.
The lack of detail on all the above is a major problem. There were a few more details here and there in the press conference, including the ECB buying in short maturities, but it would have been far better for Mr Draghi to have kept quiet and deliver the "big splash" when there was sufficient agreement to allow the details, and the action, to follow in short order. Expectations should have been much better managed and Mr Draghi's credibility is taking a hit accordingly.
There be Draghis – alphaville
/ FT
Given last week’s declaration that Draghi would do “whatever it takes” to restore the transmission mechanism and Europe with it… what could possibly have led to Thursday’s disappointing ECB action?
Given last week’s declaration that Draghi would do “whatever it takes” to restore the transmission mechanism and Europe with it… what could possibly have led to Thursday’s disappointing ECB action?
The ECB gives a tiny glimmer of hope, not more! – re-define
The promise of ECB measures announced today
merely begins to address some of the symptoms of the serious economic and
political dynamics at work in the EU so will only buy EU policy makers some
time. Exactly how much, is hard to tell.
ECB meeting - Draghi opening the door for
politicians – Danske
Bank (pdf)
So that's what he meant – Free
exchange / The Economist
There are a number of potential pitfalls.
First, the German constitutional court is currently considering whether the ESM
is consistent with the German constitution…Second, a small creditor county in
northern Europe…third, Mr Draghi has to reckon with opposition from the German
Bundesbank,
Was Draghi really a disaster? – alphaville
/ FT
It is simply extremely difficult to design asset purchases beyond the SMP that work for the 17 eurozone states as whole. This isn’t the Fed we’re talking about here. How should the ECB get round the fact that super-low German yields are screaming a transmission problem just as much as high periphery rates?
It is simply extremely difficult to design asset purchases beyond the SMP that work for the 17 eurozone states as whole. This isn’t the Fed we’re talking about here. How should the ECB get round the fact that super-low German yields are screaming a transmission problem just as much as high periphery rates?
Second Policy Failure of the Week – Tim
Duy’s Fed Watch
An epic policy failure by the ECB. Not only is the ECB willing to let the
Eurocrisis simmer for another month, but their communication strategy is
abysmal. Draghi very desperately needs
to be more aware of the impact of his comments.
As for the ECB statement, I think it says that the ECB is a second line
of defense, and they will act reluctantly only after the EFSF/ESM fund is
activated. This seems to imply a formal
bailout request as a precondition to ECB action.
USA
OTHER
EMEA Weekly – Danske
Bank (pdf)