(TEL) Eurozone Bail-Out Fund Has To Resort To Buying Its Own Debt

Simply bizarre. I assume by other “EU entities” the EIB bought some? This is really becoming Enronesque. Really is almost mind-boggling that they did this, and as far as I know, if it was a public new issue in the US where a company was buying it on the break (or putting in orders) it would likely be in violation of some SEC law.

The ECB is ultimately going to be the lender of ONLY resort in Europe and it is going to have be with full printing capacity as I’m not sure how much can be sterilized in this environment. This realization that the ECB is going to have to do everything is what is keeping the market up. Unity governments are one thing, and may even be helpful, but the market is looking more and more to the ECB.

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Eurozone Bail-out Fund Has to Resort to Buying Its Own Debt

2011-11-12 21:40:35.458 GMT

Harry Wilson and Kamal Ahmed

Nov. 12 (Telegraph) — Europe’s €1 trillion (£854bn) rescue

fund has been forced to buy its own debt as outside investors

become increasingly concerned about the worsening eurozone

sovereign debt crisis.

The European Financial Stability Facility (EFSF) last week

announced it had successfully sold a €3bn 10-year bond in support

of Ireland.

However, The Sunday Telegraph can reveal that target was

only met after the EFSF resorted to buying up several hundred

million euros worth of the bonds.

Sources said the EFSF had spent more than € 100m buying up

its own bonds to help it achieve its funding target after the

banks leading the deal were only able to find about €2.7bn of

outside demand for the debt.

The revelation will be seen as a major failure and a

worrying sign of future buyers strike after EFSF officials and

their bankers had spent recent weeks travelling the world

attempting to persuade key investors, including China’s national

wealth fund and Japanese government funds, to buy its bonds.

Chinese and Japanese money was crucial to last year’s first

bond sales by the EFSF, but they have since been dismayed by the

eurozone’s failure to resolve the worsening debt crisis and

alarmed at how fund has morphed from being a rescue facility for

European banks into a potentially €1 trillion leveraged

first-loss insurer for eurozone governments.

Other European Union funds are also understood to have

supported the EFSF’s bond sale. The failure of the EFSF will

increase pressure on the European Central Bank to effectively

become the lender of last resort for the eurozone, a move it has

strongly resisted.

At a private breakfast organised by PI Capital last week,

Mark Hoban, the Treasury minister, said: “What it doesn’t do is

provide the next stage of the solution, which is how do you stop

this from happening again?” he said.

The move, by the European Investment Bank, will cause more

disquiet among non-eurozone EU members who have become concerned

about their growing exposure to the cost of rescuing the currency

bloc.

-0- Nov/12/2011 21:40 GMT