As Final EFSF Details Emerge, German FinMin Says Bail Out Fund Won't Halt Crisis - News and Current Events | futures trading

Go Back

> Futures Trading, News, Charts and Platforms > Traders Hideout > News and Current Events

As Final EFSF Details Emerge, German FinMin Says Bail Out Fund Won't Halt Crisis
Started:November 29th, 2011 (06:00 PM) by Quick Summary Views / Replies:155 / 0
Last Reply:November 29th, 2011 (06:00 PM) Attachments:0

Welcome to

Welcome, Guest!

This forum was established to help traders (especially futures traders) by openly sharing indicators, strategies, methods, trading journals and discussing the psychology of trading.

We are fundamentally different than most other trading forums:
  • We work extremely hard to keep things positive on our forums.
  • We do not tolerate rude behavior, trolling, or vendor advertising in posts.
  • We firmly believe in openness and encourage sharing. The holy grail is within you, it is not something tangible you can download.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.

You'll need to register in order to view the content of the threads and start contributing to our community. It's free and simple, and we will never resell your private information.

-- Big Mike

Thread Tools Search this Thread

As Final EFSF Details Emerge, German FinMin Says Bail Out Fund Won't Halt Crisis

Old November 29th, 2011, 06:00 PM   #1 (permalink)
Quick Summary
As Final EFSF Details Emerge, German FinMin Says Bail Out Fund Won't Halt Crisis

Some final details are coming out from Europe this evening on the EFSF structure, size, and funding. We provided a framework for understanding the entity this morning, along with some views on just how successful it would (or would not) be. EFSF CEO Regling stated that various approaches will be used simultaneously, providing the entity with more funding flexibility, which is odd since in the next breath he notes the decision to tap the short-dated debt markets in December (seems with all that flexibility you might want to go a little further out). The current lending capacity is EUR 440bn, and they expect a 20-30% partial protection approach meaning they could theoretically leverage around EUR 250bn by around 3-4x. What is most ironic is German FinMin Schaeuble's comments, via The Telegraph, that "although Europe desperately needed a fund "capable of action", plans for the EFSF were too "intricate and complex" for investors to understand", further noting that the fund won't stem the debt crisis.

Please register on to view futures trading content such as post attachment(s), image(s), and screenshot(s).

EFSF 10Y yields are around 4% currently - almost 150bps wide of the mid-September levels. Perhaps this helps explain the need for short-term funding.

Full EFSF Statement (in which there is nothing new and realistically no specifics):

Brussels/Luxembourg – Euro area Finance Ministers agreed on 29 November on the terms and conditions to extend EFSF’s capacity by introducing sovereign bond partial risk participation and a Co-Investment approach. Ministers also adopted amended EFSF guidelines concerning intervention in the primary and secondary debt markets and precautionary credit lines in order to use leverage. Klaus Regling CEO of EFSF commented “Both options are designed to enlarge the capacity of the EFSF so that the new instruments available to the EFSF can be used efficiently”.

Under the partial risk protection, EFSF would provide a partial protection certificate to a newly issued bond of a Member State. The certificate could be detached after initial issue and could be traded separately. It would give the holder an amount of fixed credit protection of 20-30% of the principal amount of the sovereign bond. The partial risk protection is to be used primarily under precautionary programmes and is aimed at increasing demand for new issues of Member States and lowering funding costs.

Under option two, the creation of one or more Co-Investment Funds (CIF) would allow the combination of public and private funding. A CIF would purchase bonds in the primary and/or secondary markets. Where the CIF would provide funding directly to Member States through the purchase of primary bonds, this funding could, inter alia, be used by Member States for bank recapitalisation. The CIF would comprise a first loss tranche which would be financed by EFSF.

Chris Frankel CFO and Deputy CEO of EFSF commented “Following extensive discussions with investors covering all types and geographical regions, a number of them have given their positive views and signalled their willingness to participate.”

EFSF will now implement these two approaches to be ready early in 2012 to use them effectively in the context of the guidelines for the new instruments on market interventions.

EFSF will be able to use both leverage options simultaneously. The final amount of “firepower” achieved through the use of the options will depend upon the concrete use and mix of the instruments and particularly the exact degree of protection between 20% and 30%. EFSF has currently a lending capacity of €440 billion and firm commitments regarding Ireland and Portugal totalling €43.7 billion.

EFSF is also expected to finance a second aid programme for Greece and fulfil tasks such as financing recapitalisation of financial institutions in non-programme countries. Without knowing the exact amounts needed, EFSF should be able to leverage own resources of up to €250 billion. Deployment of either instrument using leverage will only be made following a request from a Member State. Any support from the EFSF will be linked to strict policy conditionality, monitoring and surveillance procedures.

So, in summary, after extensive discussions with probably every sucker sovereign wealth fund in the world, the highly complex structure credit product and its various entities will only be able to find private funds via short-term debt markets? And that is what will save us all? Forgive our incredulity as we tend to agree with Wolfgang that this won't work.

More on ZeroHedge...

Reply to share your thoughts on this current event.


Reply > Futures Trading, News, Charts and Platforms > Traders Hideout > News and Current Events > As Final EFSF Details Emerge, German FinMin Says Bail Out Fund Won't Halt Crisis

Thread Tools Search this Thread
Search this Thread:

Advanced Search

Upcoming Webinars and Events (4:30PM ET unless noted)

NinjaTrader 8: Programming Profitable Trading Edges w/Scott Hodson

Elite only

Anthony Drager: Executing on Intermarket Correlations & Order Flow, Part 2

Elite only

Adam Grimes: Five critically important keys to professional trading

Elite only

Machine Learning Concepts w/FIO member NJAMC

Elite only

MarketDelta Cloud Platform: Announcing new mobile features

Dec 1

NinjaTrader 8: Features and Enhancements

Dec 6

Similar Threads
Thread Thread Starter Forum Replies Last Post
Germany 'won't give more to EU bail-out fund' kbit News and Current Events 0 October 1st, 2011 10:43 PM
Rescue fund not big enough for Italy: German paper kbit News and Current Events 0 July 10th, 2011 07:28 PM
Greek PM Jettisons Finmin in Crisis Reshuffle Quick Summary News and Current Events 1 June 17th, 2011 05:35 PM
Bank Won't Give You a Loan? A Hedge Fund Might Be Willing Quick Summary News and Current Events 0 June 9th, 2011 12:20 PM
Non-US Banks Gained from Fed Crisis Fund Quick Summary News and Current Events 0 December 28th, 2010 05:40 AM

All times are GMT -4. The time now is 02:08 AM.

Copyright © 2016 by All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts

Page generated 2016-10-26 in 0.06 seconds with 19 queries on phoenix via your IP