Overnight, the ECB reported on the LTRO repayments for the first time since handing out the cheap 3-yr loans in late 2011. It turns out more than half of the 523 banks in the program decided to pay the ECB back as soon as they’ll be allowed (5 days from now), which makes for an amount more than 33% bigger than expectations. This is a huge hit for the “EU is gonna collapse!” crowd. Without saying anything about the nature of economic growth in the EU, the that “crowd” is a major reason that rates have been as low as they were/are. If the EU looks less on the bring of utter collapse, rates rise, as they have been for the past 7 months (it’s been harder to see in terms of mortgages due to the timing of QE3.
Then there’s the domestic situation. It might not be all sunshine and lollipops either, but we’ve had two weeks of big beats in Jobless Claims and NFP in the coming week along with an FOMC announcement from a Fed that’s explicitly tied the policy outlook to unemployment! It’s hard to know whether NFP or the FOMC Announcement is next week’s chicken or egg, but it looks like markets are already getting a bit queasy at the thought of trying to digest either one, should it prove to be the least bit unpalatable.