This wasn't supposed to be news, folks. ECB has pre-announced that it will be closing down its 12 months lending facility some time ago, and the readers of this blog would have known this much - see
here. So what's the rush to shout 'Stop!' now, then?
Well, it turns out that in the best European tradition, Euro area banks have conveniently decided not to do much about their deteriorating loan books, preferring the Ponzi scheme of monetizing their poor loan books via ECB funding, and ignoring all warning lights.
Per Bloomberg report today: the ECB said it will lend banks €131.9bn more under its 3-mo lending facility. European banks tomorrow will have to repay €442bn in 12-mo funds, assuming ECB wants to preserve the remaining shreds of monetary credibility and shuts down the pyramid game. So, promptly a week after Bank for International Settlements' dire warning that zero interest rates are leading to shortening maturity of banks & sovereign debts, inducing greater maturity mis-match risks for both, we have a roll over of 1/3rd of the ECB quantitatively-eased banks debts into a much shorter maturity instrument.
ECB said that Euro area-wide, 171 banks asked for the 3-mo funds at 1%, with banks allowed to borrow in the market at about 0.76% euribor and rising (again, the theme picked up by this blog ahead of general media attention:
here).
And there is not a chance sick-puppies, like Irish, Greek, Spanish or Portuguese banks, can borrow at the euribor rates. Instead, as the Indo reports today, Fitch ratings agency estimates that the Irish banks borrowed a whooping 12% of the €729bn the ECB has lent to all Euro area banks in 2009. Some of this is accounted for by the IFSC-based facilities. But some, undoubtedly, is held by the Irish banks, and their own IFSC affiliates. Not surprisingly, Irish banks shares have been running red in days preceding July 1...
The liquidity fall-off curve is getting curvier for Irish banks, to use Bertie Ahearne's model of dynamic analysis.
Bloxham morning note reports on an interesting development: the Arms index - an index measuring overall bullishness (for values <1.0)>1.0) of the stock markets "rose to one of the highest levels in at least the last seventy years yesterday rising to over 16 before closing at 5.88". This is an extreme move and at these valuations it is consistent with the overall markets bottoming. As Bloxham note states, "what is fascinating is that yesterdays extreme reading was in fact higher than the 11.89 found at the absolute bottom of the 1987 crash. The pullback in February 27
th 2007 also ended on an extreme reading of 14.84." Here's the chart - again, from Bloxham's note:
Exceptional!
We are now at 444,900 and climbing. In the year to June 2010 there was an unadjusted increase of 37,420 (+9.0%), down from an increase of 43,788 (+11.1%) in the year to May 2010. But that offers little in terms of consolation - most of people on LR in 12 months to May are still there - unemployed or underemployed.
A snapshot of weekly numbers above. Depressing. The average net weekly increase in the seasonally adjusted series in June 2010 was 1,450, which compares with a weekly increase of 1,650 in the previous month. But unadjusted things are looking much worse (figure above).
The standardised unemployment rate in June was 13.4%. This compares with 12.9% in the first quarter of 2010, the latest seasonally adjusted unemployment rate from the Quarterly National Household Survey. We are firmly on track to reach 13.7% before the end of this year.
As I said in my previous post on QNA data (here): we are having a fake recovery.
