Reply #64: ECB: Speculators Given Pacifier and Now a Bit Less Sated

[Ghost Dog]

It’s all good again and for the upteempth time in the past week and a half we are ready to gap up. This time of course over that very annoying S&P 1265 which has provided resistance the past 3 sessions...

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Update 8:52 AM – Draghi just said he was surprised that his comments re: fiscal compact (see previous post) had the market assuming there would be more bond buying post fiscal compacts… the market is not happy with that.

Also the rate cut was not unanimous. Futures selling back down on those comments… yes every word changes the whole complexion of things…. remember it’s the nonsense market, completely reliant on interventions.

/... http://wallstreetpit.com/87327-draghi-announced-4-non-standard-measures-at-presser-speculators-given-pacifier-and-now-sated

"I was surprised by the implicit meaning that was given (to my comments last week," Draghi told a news conference after the ECB cut interest rates to 1.0 percent.

Some reports last week said Draghi had hinted that the bank could take stronger action - maybe by buying euro zone government bonds more aggressively - if European leaders agree on tighter budget controls at a summit starting later.

Earlier this week ratings agency S&P warned that its threat of a mass downgrade of euro zone members would be tough to avoid if larger ECB bond buying was not part of Friday's summit deal.

/... http://uk.reuters.com/article/2011/12/08/uk-ecb-rates-bonds-idUKTRE7B713C20111208


Mario Draghi cuts ECB interest rates: speech in full

... In its continued efforts to support the liquidity situation of euro area banks, and following the coordinated central bank action on 30 November 2011 to provide liquidity to the global financial system, the Governing Council today also decided to adopt further non-standard measures. These measures should ensure enhanced access of the banking sector to liquidity and facilitate the functioning of the euro area money market. They are expected to support the provision of credit to households and non-financial corporations. In this context, the Governing Council decided:

First, to conduct two longer-term refinancing operations (LTROs) with a maturity of 36 months and the option of early repayment after one year. The operations will be conducted as fixed rate tender procedures with full allotment. The rate in these operations will be fixed at the average rate of the main refinancing operations over the life of the respective operation. Interest will be paid when the respective operation matures. The first operation will be allotted on 21 December 2011 and will replace the 12-month LTRO announced on 6 October 2011.


Second, to increase collateral availability by reducing the rating threshold for certain asset-backed securities (ABS). In addition to the ABS that are already eligible for Eurosystem operations, ABS having a second best rating of at least “single A” in the Eurosystem harmonised credit scale at issuance, and at all times subsequently, and the underlying assets of which comprise residential mortgages and loans to small and medium-sized enterprises, will be eligible for use as collateral in Eurosystem credit operations. Moreover, national central banks will be allowed, as a temporary solution, to accept as collateral additional performing credit claims (namely bank loans) that satisfy specific eligibility criteria. The responsibility entailed in the acceptance of such credit claims will be borne by the national central bank authorising their use. These measures will take effect as soon as the relevant legal acts have been published.

Third, to reduce the reserve ratio, which is currently 2%, to 1%. This will free up collateral and support money market activity. As a consequence of the full allotment policy applied in the ECB’s main refinancing operations and the way banks are using this option, the system of reserve requirements is not needed to the same extent as under normal circumstances to steer money market conditions. This measure will take effect as of the maintenance period starting on 18 January 2012.

/... http://www.telegraph.co.uk/finance/financialcrisis/8943327/Mario-Draghi-cuts-ECB-interest-rates-speech-in-full.html