- ECB unexpectedly reinstates long-term refinancing operations allowing banks to borrow unlimited funds
- ECB returns to bond markets after months-long layoff; buys Portugal and Ireland, not Italy and Spain; market mystified
- European markets fall sharply; Stoxx 600 down 3.4%; 2-year German yield falls to 0.83%
- Bank of NY charging institutions to keep cash on deposit, effectively creating negative interest rates
- US, ECB undermine MOF: intervention not part of a multilateral process
- US weekly jobless claims fall 5l to 400,000
- Global equity markets swoon: S&P falls 4.8% , Brazil down 5.7%, Mexico down 3.4%
- US 10-year note falls 19 bp to 2.42%; 2-year note yield falls to record low of 0.26%
Wholesale carnage. Markets around the globe were badly spooked by the ECB doing a 180 degree turn and offering the market unlimited liquidity at fixed rates for up to 6 months at today’s ECB meeting. It also relaunched its bond-buying program but was unable to articulate why they were buyers today as opposed to a month ago when Greece was crating contagion throughout the Euro zone. They also confounded the market by buying Irish and Portuguese bonds instead of those of Spain and Italy, countries many in the market assume are salvageable as opposed to the bailout cases.
USD/JPY had the rug ripped out from it as both the US and the ECB said that Japan is essentially on its own as far as intervention is concerned. It fell back to 78.67 before steadying. It ends at 79.12
Commodity currencies were laid to waste as global growth fears combined with liquidation of winning positions to cover margin calls on losers swept through the markets. AUD/USD ends on its lows of 1.0470 and USD/CAD at 0.9800. The CRB index fell 2.8%, oil fell $5.50 to $86.36 and gold fell $30 to 1650.
USD/CHF ends the day within shouting distance of recent record lows, now t 0.7675. EUR/CHF has given back virtually all the gains made on the Swiss moves from Wednesday and ends at 1.0825.