What Happens On Friday??

On Friday the Repo Window in the ECB containing Half a TRILLION of iffy securities will close to new business. We will not be able to issue government bonds and chuck them in there by fair means or foul to get cash any more.

Some countries have swapped the iffy securities out already ( the core EU states like Austria and Holland with Germany well on its way out in July ) and will be unaffected. Ireland Portugal Spain and Greece have not. The Spanish are to be downgraded this week by the rating agencies to cap matters.

Here is a chart

https://av.r.ftdata.co.uk/files/2010/09/ECB_borrowing_Sept30.jpg

And here is the FT Alpha article on the issue.

ftalphaville.ft.com/blog/2010/09 … liquidity/

I thought the big roll-over was in July and that the September one was only half the size?

Well, the long-term repo window will close, but the short-term one will still be open for ‘fine-tuning’. But that leaves the banks in a hand-to-mouth existence - the very reason for the guarantee in September 2008. It would be comical in its repetition if it was not so depressing in its predictability.

I expect the borrowing window at the Irish Central Bank will remain open. Which will rather heavily tie up the government’s cash pile, I suspect. When is a cash pile not a cash pile? When it is propping up the banks.