Behind these alternate trajectories lies the simple fact that when a bank, for example, enters as a borrower in the repo market the collateral it posts for loans granted - typically government debt certificates - finds itself registered in the name of the lender for the duration of the repo contract. These transfers of ownership are, rightly, not considered to be equal, for national accounts purposes, to outright bond market investment purchases. Unfortunately, most of the world's information providers appear to be unable, or unwilling when faced with luxury of a news story that writes itself, to appreciate this distinction.
In other words, what the red line in the chart actually shows is that the ECB's two LTRO programs, at the ends of December 2011 and February 2012, accomplished what they set out to do - to replace the private repo markets that were insisting on debillitatingly large collateral haircuts to fund Spanish banks' liquidity needs. The end result was what appeared to the uninititiated to be 80 billion euros in capital flight from November 2011 through August of this year.
We would humbly suggest that this last fact would have produced a more appropriate header than Reuters' 'Foreign investors began dumping Spanish bonds in October'. But, then again, we are not attempting to obfuscate, as the Reuters writer certainly is, the juicy detail behind the last paragraph of the piece. Foreign investment in Spain surged by 30 billion euros between August and September - an event memorably understated with a sentence...
'Bank of Spain data on Friday showed that foreign investors had put more money into Spain than they had taken out in September, the first time this had happened for 15 months,...'...which arrives at the gloriously nonsensical conclusion that:
'...this is likely to weaken after October's bond data.'For the information of readers and Reuters alike, the bond ownership data used to calculate foreign holdings in the national accounts are ex-repo. Term holdings, by their official name.
Get with the program, Reuters. You're being shown up by a fucking olive farmer. This scribe would be ashamed to show his face in the street.