February 29, 2012
The European Central Bank (ECB) loaned 800 banks €529.5B in cheap three-year loans as a part of their Long-Term Refinancing Operation (LTRO- or should I say LTRO2). This comes on top of the €489B of similar loans issued in late December by the ECB to 500 banks. The programs are aimed at avoiding an escalating crisis as banks struggle to pay off maturing debts, as well as mitigate the impact of a pullback in bank lending to customers within the euro-zone. Although the ECB, hoping to avoid any negative connotations being associated with the program, does not disclose the identities of the banks that borrowed under the program, dozens of European banks (including almost all Spanish and Italian banks) have disclosed that they did borrow in December, and many expected to borrow again this week. Because roughly €150B of short- and medium-term ECB loans mature this week, net new liquidity entering the system is actually around €379B.
An unidentified party has requested the International Swaps and Derivatives Association (ISDA) rule on whether the collective-action clauses for Greek soverign debt should be classified as a “credit event,” which would trigger a payout on credit-default swaps. This move came shortly after S&P downgraded Greece to selective default, making them the first euro-zone member to have that a “default” rating. Payouts from sellers of a net $3.2B worth of CDS on Greece hangs in the balance. The ISDA has announced that the Determinations Committee will decide by 5pm GMT “whether to accept the question for deliberation or reject it.”
U.S. equity index futures are pointing to a higher opening and are currently trading up +0.1% on the day. The S&P 500 has rallied +4.6% in February, and looks to be headed for its third straight month of gains. Global sentiment is higher as euro sovereign debt yield spreads to Germany decline, the dollar falls, and equities are mostly higher.
Today’s Economic Data Lineup (EST)
~7am, Finland’s parliament votes on Greek bailout
7:00am, MBA Mortgage Apps, week of Feb. 24
8:30am, 4Q GDP (second revision), est. 2.8%
8:30am, Personal Consumption (second revision), est. 2.0%
9:30am, Fed’s Fisher speaks on U.S. economy in Mexico City
9:45am, Chicago Purchasing Managers, Feb., est. 61.0 from 60.2
10:00am, NAPM-Milwaukee, Feb., est. 58.8, previous 58.4
10:00am, Fed’s Bernanke delivers semi-annual monetary policy report in Washington
11:00am, Fed buying $1.5b-$2b in 2/15/2036-2/15/2042 range
1:00pm, Fed’s Plosser speaks on economy in New York
2:00pm, Beige Book
- Mitt Romney won his native state of Michigan last night by only 3 points; Santorum threatened an upset, but was bested in the end. His margin of victory in Arizona was a much higher 22 points.
- The U.S. Economy expanded at a 3% rate, compared to estimates calling for no change in the previously reported 2.8%
“The important thing is this: To be able at any moment to sacrifice that which we are for what we could become.”
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