Zero Hedge's reaction to the second sterilization failure: Next European Leg Down? First Failed ECB Monetization Sterilization, As Central Bank Has E13 Billion Shortfall In Bond Bids (12/28/2010)

Today, to little fanfare, the ECB managed to obtain just E60.8 billion in tender interest for its most recent 7 Day SMP "peripheral bond monetization" operation, whereby it needed at least E73.5 billion to be able to offload all of its cumulative acquired sovereign bonds to other financial institutions: a de facto sterilization, which is why the ECB has so far been claiming it is not monetizing debt (as it constantly rolls the held balance on other bank balance sheets). That is no more: following today, the ECB is left with just under E13 billion in sovereign holdings and thus are not sterilized. ... And what is most disturbing is that this complete lack of interest (or telegraphed lack of bank liquidity) happened even as the marginal rate jumped by over 50%, from 0.6% to 1%- the same as the maximum rate allowed on an auction. ... Because despite what ING economist Martin Van Vliet told Reuters, "It has happened before but I wouldn't make too much of a big deal out of it", we would make a big deal out of it, as this has actually not happened before.

The entry is accompanied by a historical chart of all auctions up to that point.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman