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Friday, January 25

25th Jan - Special: LTRO repayments

Updated 15:00 GMT 27-Jan. Note: if you are terribly interested in LTRO, you might want to check my most popular ever post LTRO The Ultimate Collection.

Previously on MoreLiver’s:

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ECB to Give First Indication of Three-Year Loan Repayment TodayBB
around noon ECB time (11:00 GMT)?

Europe's Banks to Repay Loans Early. Good News or Not?BB

  PREVIOUSLY
Ten Things You Should Know about the LTROMarc to Market

The ECB’s 3-year LTROs and the shift in credit supplyAlea

Payback of ECB Lending to Mark New Step Back to NormalWSJ
EURUSD Is Vulnerable Ahead Of 'LTRO Friday'ZH
Note from Citi.

Global Alpha Weekly Nordea (pdf)
FX: Safe-havens out of fashion * Fixed Income: Steeper yield curves a major them in 2013 * LTRO and the early repayment option

LTRO repayment bifurcation riskalphaville / FT
The first LTRO repayment opportunity is fast approaching. David has already considered how it may or may not impact European lending rates, including the chances of Eonia rising significantly if the repayment is larger than expected.

LTRO repayments will be mostly good newsNordea (pdf)
Summary here.

FI Strategy – LTRO and the early repayment optionNordea (pdf)
On Friday, January 25, the ECB will announce the first amount to be repaid of the three year LTROs. We estimate EUR 200bn to be paid back during 2013, with limited market impact in the short term.

Eurozone liquidity and menacing strawsalphaville / FT
We've already opined on the chances that early-LTRO repayment will lead to a drain on excess-liquidity in the euro-area. But we argued that since it is unlikely to take more than about €200bn out of circulation, with consensus expecting about €130bn to be sent back, the effects should be muted. But what if another straw is soon to be inserted?

The great European bank heist reversalalphaville / FT
LTRO repayment chat is speeding up the closer we get to the fateful day at the end of January when Euro-banks might actually start sending back once cheap cash to the central bank. How much will be repayed, by whom and when are the questions that need to be answered.

We don’t want your moneyNordea
Banks will have the first chance to repay the 3-year money borrowed from the ECB on 30 January. Early repayments are likely to lead to expectations that excess liquidity would fall notably, giving rise to pricing of higher short rates. However, despite the repayments, plenty of excess liquidity will most likely remain, keeping short rates very close to current levels.

Weekly Focus: Market focus turning to LTRO repaymentsDanske Bank (pdf)
Europe IFO, PMI, Eurogroup/Ecofin meetings * US PMI * China PMI * Japan BoJ meeting

UPDATE 1


Banks Return €137 Billion In LTRO Funds To ECB: Goldman's TakeZH

ECB Says Banks to Repay More Than Forecast of 3-Year LoanBB

Bunds fall, euro and bank stocks rise after LTRO paybackReuters

Euro Gains After Loan Data as Stocks Rise, Yen FallsBB

UPDATE 2


LTRO flowalphaville / FT

That’s around 30 per cent of the first three-year LTRO being sent back to the European Central Bank by 278 banks. The second three-year LTRO will become repayable from the 27th of February, with its initial announcement coming on the 22nd. The €137bn or so being repaid this time is higher than the market expected, but not shockingly so.

UPDATE 3


Too early to celebrate ECB's balance sheet reductionSober Look

Europe's 'Bank Sector Involvement'Mark Grant / ZH
The interest rate, being paid by the European banks to the ECB is 0.75%, so one may rationally assume that no financial institution, in their right mind, would pay off such a loan for economic reasons. The banks cannot borrow on their own for three years at this level and so to pay them off early makes no economic sense. Yet they are being paid off and if it does not make sense economically then it must make sense for some other reason or reasons.