Things That Make You Go Hmmm – Such As The Transition From Conspiracy Theory To Conspiracy Fact


From Grant Williams, author of Things That Make You Go Hmmm,

Attempts to manipulate free markets invariably end badly – after all, they are, supposedly, by their very nature, free.

Over the past few weeks, the exposure of the Libor-rigging scandal has monopolized the headlines of the financial press and inveigled its way onto the front pages of every major news publication in the world through the sheer size and scale of the story.

Something as big as this just CAN’T be hidden from the public.

Only… it can.

It has been. It no doubt still is to a certain extent. I’m not going to go through all of the events of the past few weeks as you are no doubt familiar with them, but [simply understanding how LIBOR works makes for a simple conclusion].

I’m afraid it’s rather obvious. Given that almost half the reported inputs that help establish the Libor rate are discarded immediately, Barclays simply CANNOT have manipulated the Libor rate alone. Period.

What’s more, to effectively ensure the rate is set at the price required, you’d need to not only establish the highest and lowest 25% of prices, but then ensure the remaining 50% average out to the required rate and, based on the fact that there are 16 banks that submit rates, that would mean about 13 of the 16 involved would need to be complicit.

As a very good friend of mine put it earlier this week; at best this is a cartel, at worst it’s outright fraud on a scale that is completely unprecedented.

So for five years there have been attempts to fix the Libor rate and, take it from me, during that time, many inside the financial industry were familiar with the rumors of such manipulation but it was another huge scandal with such highpowered connected interests that it would no doubt be brushed squarely under the carpet. Forget ‘too big to fail’. This was ‘too deep to prove’.

Libor is so important to so many people in the financial industry that the question of why it was manipulated really ought to be framed differently:

Assuming you COULD manipulate something as important and potentially beneficial as the Libor rate with such ease for years, why wouldn’t you?

The answer to this question would ordinarily be:

“Because it’s illegal and government regulators would throw the book at us”

So, working from the ground up; we have a set of traders looking to produce the best profits they can for personal gain, the major bank they work for and who should be supervising them with a need to disguise the level of its own funding costs and above them all, a government seeking to keep borrowing costs down in the middle of a gigantic financial storm. From such alignments of interest are the greatest of conspiracies born.

In my humble opinion, the Libor scandal (which has a LONG way to go before it has played out and which will claim a LOT more scalps) will mark a fundamental change in the treatment of financial conspiracy theories in the media. The sheer amount of coverage it will undoubtedly receive will signal a shift in attitude towards the exposing of such scandals rather than the blind-eyes that have been regularly turned in recent years.

But perhaps, most-of-all, watching how quickly those in high places begin to throw each other under the bus, it will hasten the end of many other possible government conspiracies as exposing such events becomes an exercise in self-preservation. Prime amongst conspiracy theories that may soon be finally proven to be either valid or the figments of overactive imaginations, are those alleged in the gold and silver markets.

The allegations concerning precious metal price manipulation predate those surrounding Libor by decades but until now day they have remained similarly acknowledged within financial circles and ignored without. That may well be about to change.

Unencumbered by liability, the rising price of gold has always been a barometer of governmental failure to protect the purchasing power of fiat currency and the best indication of the damage that inflation does.

 

Forget inexorably rising gold prices. Forget the corrections that shake loose hands from the wheel at every turn. In the broader context they carry far less relevance than the intrinsic values that gold provides a consistent yardstick to.

 

A look at the value of assets measured in ounces of gold remains the most consistent way to get a sense of their real value and the charts below demonstrate all too clearly the true performance of the Dow Jones Industrial Average and average US house prices over the long term when measured in gold ounces.

If the long-stated claims about government-sanctioned, bank-led manipulation of precious metals markets put forward so eloquently by the likes of Ted Butler, Bill Murphy & Chris Powell at GATA as well as Messrs. Sprott, Sinclair, Davies et al are eventually proven to have any validity whatsoever, the fallout from the Libor scandal will prove to be (to use the words of Jamie Dimon) just another “tempest in a tea pot” as the precious metals are the very underpinnings of the entire global financial system. Conspiracy or no, it would be a blessed relief to get closure no matter what the truth turns out to be.

 

As for the full note by Grant Williams, which has much more in it, it can be found below (pdf):

Hmmm Jul 08 2012

Key Events In The Coming Week


A preview of the key events in the coming week (which will see more Central Banks jumping on the loose bandwagon and ease, because well, that is the only ammo the academic econ Ph.D’s who run the world have left) courtesy of Goldman Sachs whose Jan Hatzius is once again calling for GDP targetting, as he did back in 2011, just so Bill Dudley can at least let him have his $750 million MBS LSAP. But more on that tomorrow.

What Matters in FX This Week : China Growth and Inflation Data, Ecofin Meeting, FOMC

The past week undid a large part of the constructive price action posted the week before and a significant part of the progress made following the Euro-area summit. First off, it was a data heavy week, during which, key releases such as the ISM and Payrolls disappointed, but not to an extent that would justify further and imminent easing of monetary policy by the Fed. Overall, the deterioration in activity and the higher threshold for Fed easing continue to push the dollar higher and continue to challenge our FX views, which are predicated on dollar weakness.

On the European front, the ECB cut both the refi and the deposit rate by 25bps, pushing the EUR lower against most trading partners. Despite broader risk-off sentiment, EUR under-performed even currencies highly sensitive to global growth like NJA FX and AUD.

The latter were broadly supported by the announcement that China eased policy rates following softer growth and inflation prints. The recovery in metals and oil prices backed the market view that policy driven demand strength in Asia may prove to be a bright spot amid this generalized deceleration in DM growth. More broadly, although our GLI indicator has shown signs of deeply negative momentum in global industrial output, it is also true that PMI data hints at underperformance of DM growth vs EM.

Net-net, this has resulted in further demand for “short DM vs long EM” trades but in a risk-neutral way. The most obvious candidate over the last few weeks has been the EUR; short EUR vs long commodity or EM FX positions have attracted considerable market interest. However, the key question remains how resilient will EMs prove to be should DM growth continue to deteriorate and risk aversion continues to pick up.

Back to Euro-area issues, following the summit results, markets likely expected to hear – either from the ECB or from governments – some provisions to protect against high and rising funding costs for Spain and Italy, even if that was a short term assurance until longer term policy goals are specified more clearly. However, the lack of clarity weighed heavily on peripheral bonds pushing Italian and Spanish yields to erase more than 2/3rds of the post summit gains. The net result was obviously also negative for risky assets more broadly.

Looking ahead, China data will be closely watched. The CPI is expected to dip significantly – to 2.1% in our forecasts vs expectations of 2.3%. A lower CPI print would leave further room for easing by local authorities, particularly if growth data justified it. In that sense, 2Q GDP will be followed by markets – we expect growth to have decelerated by 0.2% from 8.1% yoy in Q1 to 7.9%. IP probably stayed flat relative to last month.

In addition to China, a large number of countries are scheduled to release IP numbers in this coming week.

The Eurogroup/Ecofin meeting will discuss some of the details missing from the latest summit results and will also discuss developments in the Greek adjustment program. FOMC minutes will provide further insight into the Fed’s assessment of slowing economic conditions in the US and the probability for balance sheet expansion ahead.

Monday July 9

  • China CPI (June): China CPI was 3.0%yoy in May. Consensus expects 2.3%, while we expect a print of 2.1%.
  • Draghi Speech at the European Parliament in Brussels
  • BOE Tucker Testimony to Commons
  • Eurogroup/Ecofin Meeting
  • Also Interesting: Japan Current Account Balance, Turkey IP, US Consumer Credit, Mexico INPC Headline Inflation

Tuesday July 10

  • UK Industrial Production (May): We expect -1.7%yoy, slightly above consensus at -2.1%yoy for May, down from -1.0%yoy for April.
  • Weidmann Speech in German Constitutional Court
  • Also Interesting: France IP, Italy IP, Sweden IP, Norway CPI

Wednesday July 11

  • Japan Monetary Policy Meeting: We and consensus expect no further easing steps from the MPC at this meeting.
  • Germany CPI (June): Consensus expects 1.7%yoy in June, unchanged from the print in May.
  • Brazil Monetary Policy Meeting: We (and consensus) expect the SELIC to be cut by 50bps from 8.50% to 8.00%
  • United States Trade Balance (May): Consensus expects -$48.4bn in May, down from -$50.1%bn in April. We expect a print of -$50.5bn.
  • United States FOMC Minutes
  • Also Interesting: Czech CPI, Hungary CPI, Turkey Current Account Balance

Thursday July 12

  • South Korea Central Bank Meeting: Consensus expects the base rate to remain unchanged at 3.25%.
  • Indonesia Central Bank Meeting: The policy rate was at 5.75% in June. Consensus expects no change in the July Meeting.
  • Chile Central Bank Meeting: We and consensus expect the base rate to remain unchanged at 5.00%
  • Euro-area IP (May): Consensus expects 0.0%mom up from -1.1%mom in April.
  • ECB Monthly Bulletin
  • Also Interesting: India IP, Sweden CPI, French CPI, US Initial Jobless Claims, Mexico IP, Peru Central Bank Meeting.

Friday July 13

  • China Real GDP (2Q): We expect real GDP to grow at 7.9% yoy (consensus 7.7%yoy) down from 8.1%yoy in the first quarter.
  • China IP (June): Consensus expects IP to be 9.8%yoy in June up from 9.6%yoy in May. We expect a flat reading.
  • Russia Central Bank Meeting: We and consensus expect no change in the overnight auction based repo rate at 5.25%.
  • US PPI (June): We expect a -0.4% print in June against consensus estimates of -0.6%mom, up from -1.0%mom in May.
  • University of Michigan Consumer Sentiment – Provisional (July): We expect a print of 74, very close to consensus at 73 and marginally up from 73.2 in June
  • Also Interesting: Japan IP, India WPI, Spain CPI, Poland CPI, Hungary IP

Japan Machinery Orders Implode As Global Economy Grinds To A Halt


Japan’s core machinery orders were expected to post a modest -2.6% drop. Instead they had a worse collapse than anything seen in the aftermath of the Fukushima disaster, plunging by a stunning 14.8% . And the kick in the groin cherry on top was the current account surplus plunged by 62.6%: consensus forecast: -14.5%. The Japanese economy has once again ground to a halt, only this time it has no earthquake or nuclear explosion to blame. This time it is the entire world’s fault, where demand has collapsed proportionately. As a reminder the BOJ expanded its QE yet again on April 27. Must be time for another QE because this time will certainly be different after more than 30 years of failures.  It is time for those brilliant central planners Ph.D’s to do engage in more of the same insanity that Einstein warned about decades ago. And incidentally this is not a joke: on Thursday the BOJ is expected to ease yet again. As a reminder, the BOJ already buys ETFs, Corporate Bonds, and REITs. What’s left: gold?

Instant View via Reuters:

HIROSHI SHIRAISHI, ECONOMIST, BNP PARIBAS

“The numbers are weak. Although the BOJ tankan indicated stronger (capital spending), uncertainty about the outlook for the overseas economy is making Japanese companies cautious. “Things won’t be as strong as the tankan suggested. We didn’t think capital spending would be that strong, because we can’t expect much growth in overseas economies. “The pace of capital spending is gradually becoming weaker. “We believe that BOJ will loosen monetary policy (at Thursday’s meeting).”

YASUO YAMAMOTO, SENIOR ECONOMIST, MIZUHO RESEARCH INSTITUTE IN TOKYO

“Looking at the May figure alone you may say that machinery orders were weak, but given that the data is volatile you cannot say capital spending is losing momentum. “Corporate capital spending remains in a moderate uptrend as the Bank of Japan’s June tankan confirmed, although the pace is tepid and levels are below those seen before the Lehman crisis. “Public spending and personal consumption are driving the Japanese economy but economic growth is likely to slow after the summer partly as government subsidies for low-emission cars run out of money. You cannot expect much from exports given uncertainty over Europe and the global economy. “The BOJ is likely to sit tight this week given the current yen movements, but it could ease policy further as early as September if it becomes clearer that the economy is slowing down.”

HIROAKI MUTO, SENIOR ECONOMIST, SUMITOMO MITSUI ASSET MANAGEMENT CO, TOKYO

“Machinery orders from both manufacturers and non-manufacturers fell a lot. External demand looks weak. A lot of companies have turned cautious about overseas economies. The global economy is weaker than we thought. “Machinery orders suggest capital expenditure is weaker than what companies indicated in the most recent Bank of Japan tankan survey. This suggests that capital expenditure plans in the tankan are likely to be downgraded. “The current account surplus took a hit from imports of liquefied natural gas. Prices for these imports should start to follow oil prices lower. “There are increasing worries for the Japanese economy. The BOJ looked like it would be on hold this week, but given weak U.S. economic data and monetary easing by central banks in China and Europe, there is now a 50 percent chance that the BOJ could ease this week.”

Shhh… Don’t Tell Anyone; Central Banks Manipulate Rates


David Zervos, Jefferies: Shhh… Don’t Tell Anyone; Central Banks Manipulate Rates

It should come as no surprise to anyone that major commercial banks manipulate Libor submissions for their own benefit. The OTC derivatives markets was designed by the big banks, for the big banks, to ensure that as they set up their own private securities exchanges – away from regulatory scrutiny – they could control the interest rate settings. Money center commercial banks did not want the “truth” of market prices to determine their loan rates. Rather, they wanted an oligopolistically controlled subjective survey rate to be the basis for their lending businesses.

To that end, if there was a big reset for a specific bank on a given trading day, and a lower rate suited, said bank would surely shade its Libor submission lower. And then of course there were the far more unscrupulous submitters who tried to influence where other banks might post rates on a given day (for a bottle of Bolly or for a quid pro quo at a future date). When there are only 16 players – a “gentlemen’s agreement” is relatively easy to formulate. That is the way business has been transacted in the broader OTC lending markets for nearly 30 years. It is impressive that it took this long for the regulators to actually realize what a complete shame the entire structure really is.

In a way, the evolution of a corrupted Libor market is par for the course when it comes to the commercial bank tear down of the Glass-Steagall act. The biggest banks in the US and Europe spent decades trying regain control of the securities markets. In the US, Gramm-Leach-Bliley was the final nail in the Glass-Steagall coffin after the tireless work of folks like Sandy Weill and Hugh McCall (and their public sector lackeys Bob Rubin, Larry Summers and Alan Greenspan). One of the best analyses of the post Glass-Steagall world was done by Luigi Zingales at the University of Chicago. His recent FT article is attached below – and it is a MUST read. From the perspective of the evolution of the OTC derivative market, and Libor misrepresentations, this paragraph from Luigi says it all –

“The third reason why I came to support Glass-Steagall was because I realized it was not simply a coincidence that we witnessed a prospering of securities markets and the blossoming of new ones (options and futures markets) while Glass-Steagall was in place, but since its repeal have seen a demise of public equity markets and an explosion of opaque over-the-counter ones.”

The money center banks have successfully created their own private marketplaces, where everyone from money managers to hedge funds to homeowners MUST trade upon rates that are set in an opaque fashion by the owners of said marketplace. It’s a travesty, but it’s our reality. Maybe that will change, but somehow I doubt it. Even going back to Jefferson and Madison, the debates on bank influence were fierce. Sadly, one of the negative by-products of our wonderful system of capitalism is that banks end up with too much political control. And, of course, they use it to create oligopolistic rents. We can all hope to set up rules that do not allow this, but it’s most likely impossible.

To reiterate, it should come as no surprise that Barclays, or any number of commercial banking institutions, used their influence to drive Libor rates towards levels that suited their positions. The rate setting structure was designed to be manipulated. To that end let’s review what Libor is – it is a rate that is not derived from any traded market, it is a survey rate. When a bank submits Libor rates at 7:29am each day, they need not have any paperwork suggesting that is where they actually borrowed funds. In fact, back in 2008, all interbank lending ceased to exist. Yes, we had a $500 trillion OTC derivatives market based off an index that couldn’t even be traded – amazing. And as the attached chart shows, the interbank lending market has never come back. Libor was designed to be an opaque and non-transparent rate. So when a bank submits a rate which may not represent its true borrowing costs, it really has done nothing wrong. The system was set up to be divorced from reality. But where banks get into trouble is when they work ologopolistically to collude on where these rates are set. That is where Barclays fell down, and that is why senior management has been wiped out.

While we can point to the ridiculousness of 16 banks in London colluding on where mom and pop’s trailer park mortgage rate is set, or where a small business loan rate is set, or where a student loan rate is set; the reality is we have no choice. I wish the bulk of our lending rates were set as a spread off Treasury yields, or COFI, or better yet the Fed funds rate/OIS. But they are not. The banks tore down Glass-Steagall, became too big to fail, and set up a $500 trillion derivatives market that is too big to close. We are stuck trading whites, reds, greens, blues, golds for a good while longer!

I once proclaimed, back in the summer of 2007, that I would not trade Libor based products ever again. In the last 12 months however I had to give in, as there were no viable hedges left for spoos. You couldn’t lever a long 2yr Treasury or Schatz position any longer because rates were 20bps – all that was left were the short end forward rates. Of course I would NEVER go long 10yr or 30yr Treasuries or Bunds because of the long term inflation risks, but I would happily trade a 3 year forward 1 year rate, thereby betting that the Fed and ECB stay too low for too long. If there was a way to liquidly trade 3 year forward 1 year OIS rate I would do it in a second – but it doesn’t exist. Unfortunately, the ONLY way to trade forwards liquidly is in LIBOR, so I had to go back on my pledge. It pains me every day, and I long for the day when Libor is replaced with something tradable and objective – until then, I like many are forced to transact in a rigged market.

So what will be the fallout from this grand realization that Libor is rigged, and money center banks collude to set rates. Like I said, my hope is that we move to an OIS based market. The overnight effective fed funds rate, or EONIA, SONIA, TONIA etc etc are TRADED rates. They represent where actual transactions took place for unsecured lending between banks. There is no subjectivity, and more importantly the central banks DIRECTLY affect the rate. The submitting banks will resist, and sadly will likely win. So I can hope we move to an OIS world, but I’m not holding my breath…I’m still trading blues.

In the end, I fully expect there will be many investigations, fines and job losses associated with the collusion activities in Libor markets. But there will be little impact on markets. Furthermore, anyone who believes (as the senior management of Barclays seemed to) that central bankers will have some accountability in this scandal is mistaken. The most bizarre thing to come out of the Barclays scandal is the attack on the Bank of England and Paul Tucker. Is it really a scandal that central bank officials tried to affect interest rates? Absolutely NOT! Central bankers try to influence rates directly and indirectly EVERY day. That is their job. From the NYFED website this is description of the monetary policy objective –

“the directive for implementation of U.S. monetary policy from the FOMC to the Federal Reserve Bank of New York states that the trading desk should “create conditions in reserve markets” that will encourage fed funds to trade at a particular level. Fed open market operations change the supply of reserve balances in the system, and by affecting the supply of balances, the Fed can create upward or downward pressure on the fed funds rate.”

All central banks, and central bankers, are in the business of setting rates. That’s what they do for a living. That’s why we spend so much time watching them. Surely, the Fed and BoE were unhappy that Libor rates, commercial lending rates, residential mortgage rates and the like were not cooperating with their traditional rate manipulation techniques in the overnight market for unsecured funds. That is why they created a myriad of unusual and exigent programs during the 2008/2009 crisis. But for the senior management of Barclays to come out and claim the Bank of England, or any central banker, was at fault for trying to “manipulate” interest rates is absurd. Congresses and Parliaments have given central banks monopoly power in the printing of money and the management of interest rate policy. These same law makers did not endow 16 commercial banks with oligopoly power to collude on the rate setting process in their privately created, over the counter, publically backstopped marketplaces. Good luck trading.

 

Why I was won over by Glass-Steagall
By Luigi Zingales

I have to admit that I was not a big fan of the forced separation between investment banking and commercial banking along the lines of the Glass-Steagall Act in the US. I do not like restrictions to contractual freedom, unless I see a compelling argument that the free market gets it wrong. Nor did I buy the argument that the removal of Glass-Steagall contributed to the 2008 financial crisis. The banks that were at the forefront of the crisis – Bear Stearns, Lehman Brothers, Washington Mutual, Countrywide – were either pure investment banks or pure commercial banks. The ability to merge the two types was crucial in mounting swift rescues to stabilise the system – such as the acquisition of Bear Stearns by JP Morgan and of Merrill Lynch by Bank of America.

 

Over the last couple of years, however, I have revised my views and I have become convinced of the case for a mandatory separation.

 

There are certainly better ways to deal with excessive risk-taking behaviour by banks, but we must not allow the perfect to become the enemy of the good. In the absence of these better mechanisms, it makes perfect economic sense to restrict commercial banks’ investments in very risky activities, because their deposits are insured. Short of removing that insurance – and I doubt commercial banks are ready for that – restricting the set of activities they undertake is the simplest way to cope with the burden that banks can impose on taxpayers.

 

The Volcker rule, which prohibits banks from engaging in proprietary trading but allows them to put their principal at risk, is not a good substitute. Proprietary trading is when a bank invests in stock hoping that its price will go up. A bank engages in principal trading when it buys a stock from a client as a service to that client, who wants to unload his position quickly. The difference is therefore one only of intentions, which are impossible to detect, since any transaction involves two consenting parties.

 

The second reason why Glass- Steagall won me over was its simplicity. The Glass-Steagall Act was just 37 pages long. The so-called Volcker rule has been transformed into 298 pages of mumbo jumbo, which will require armies of lawyers to interpret. The simpler a rule is, the fewer provisions there are and the less it costs to enforce them. The simpler it is, the easier it is for voters to understand and voice their opinions accordingly. Finally, the simpler it is, the more difficult it is for someone with vested interests to get away with distorting some obscure facet.

 

The third reason why I came to support Glass-Steagall was because I realised it was not simply a coincidence that we witnessed a prospering of securities markets and the blossoming of new ones (options and futures markets) while Glass-Steagall was in place, but since its repeal have seen a demise of public equity markets and an explosion of opaque over-the-counter ones.

 

To function properly markets need a large number of independent traders. The separation between commercial and investment banking deprived investment banks of access to cheap funds (in the form of deposits), forcing them to limit their size and the size of their bets. These limitations increased the number of market participants, making markets more liquid. With the repeal of Glass-Steagall, investment banks exploded in size and so did their market power. As a result, the new financial instruments (such as credit default swaps) developed in an opaque over-the-counter market populated by a few powerful dealers, rather than in a well regulated and transparent public market.

 

The separation between investment and commercial banking also helps make the financial system more resilient. After the 1987 stock market crash, the economy was unaffected because commercial banks were untouched by plummeting equity prices. During the 1990-91 banking crisis, securities markets helped alleviate the credit crunch because they were unaffected by the banking crisis. By contrast, in 2008 the banking crisis and the stock market crisis infected each other, pulling down the entire economy.

 

Last but not least, Glass-Steagall helped restrain the political power of banks. Under the old regime, commercial banks, investment banks and insurance companies had different agendas, so their lobbying efforts tended to offset one another. But after the restrictions ended, the interests of all the major players were aligned. This gave the industry disproportionate power in shaping the political agenda. This excessive power has damaged not only the economy but the financial sector itself. One way to combat this excessive power, if only partially, is to bring Glass-Steagall back.

The Horror… The Horror: European July, August Sovereign Bond Issuance Calendar


Well at least Spanish 10 Year bonds aren’t above 7% and Italy is safely below 6%. Wait… what’s that? Oh… uh uh… uh uh… Oh… Really… Oh ok…

Scratch that.

As a reminder 7% is and has always been a very magic number for Europe:

Full forward bond issuance:

July

  • 10 July: Greece auction. Bills.
  • 12 July: Italy auction. Bills.
  • 13 July: Italy auction. Bonds.
  • 17 July: Spain auction. Bills.
  • 17 July: Greece auction. Bills.
  • 19 July: Spain auction. Bonds.
  • 24 July: Spain auction. Bills.
  • 26 July: Italy auction. Bonds.
  • 27 July: Italy auction. Bills.
  • 30 July: Italy auction. Bonds.

Other events:

  • 20 July: Eurogroup meeting (tentative). According to Reuters, the MoU on Spanish bank recap has been delayed to allow more time for negotiations and a new Eurogroup meeting has been pencilled in for 20 July. The MoU is due to specify the terms of the European loans – duration and interest rates. Again according to Reuters the first tranche of the loan will be sent to Spain’s bank restructuring fund  (FROB) on time for the
    state rescued banks.

 

August:

  • 2 August: Spain auction. Bonds
  • 13 August: Italy auction. Bills
  • 14 August: Italy auction. Bonds
  • 16 August: Spain auction. Bonds
  • 21 August: Spain auction. Bills
  • 28 August: Spain auction. Bills
  • 28 August: Italy auction. Bonds
  • 29 August: Italy auction. Bills
  • 30 August: Italy auction. Bonds

Other events:

20 August: ESM to become operational (Tentative). The following euro-area countries have not ratified the ESM yet: Estonia, Italy and Germany. We think they will all do by the first week of August. Then the first installment of the capital has to be paid by each ESM member within 15 days of the ESM treaty entering into force. Hence, the ESM will not be in a position to lend money until the last 10 days of August.

Source: Deutsche Bank

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