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3 Month Euribor: 0.899% Versus 0.896% Yesterday, Fresh 2010 High
Someone stubbornly refuses to give the European interbank lending market the memo that all European banks are all fine and dandy now. Either that, or the EUR short covering squeeze which has taken the EURUSD all the way to 1.306 this morning, continues in full force as European banks continue experiencing a shortage of euros as Zero Hedge discussed several times previously, snarling up money markets worse than at any time in 2010.
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who cares.......these datas dont work in an Orwellian world ruled by the Archons......they will complete the Right shoulder anyway....n they r ramming it up
Can't I sell 500Bn euros at 1.30 into the market for a few days?
http://graphics.thomsonreuters.com/10/EZ_ECBLQ0710.jpg
Graph for excess liquidity in the euro zone banking system
(the one, single tag "10 Year Treasury" is slighty off, is it not?)
Hallo mr.Durden, i don't completly understand the reason why Eur3m 0,900% or even 2% is a problem. In my vision European Interbank market only went out from very-very low rates. Have any sense claim that we are at the top EUR3m point of the year? I think not.
So were is the real point in 0,899% 3m euribor rate (or even 2%)?
Thanks in advance.
It means collapse is coming. European banking sector is toast. Want marmalade?
Ok how about this...
Dont think about the rate itself, think about the change. I think it's the marginal effects that are interesting. Especially day after day....
Why would Libor rise from 1 day to the next? Remember this is an average of banks quotes, so its smoothed in some sense. Remember this is bank-bank lending, and nobody wants to spook the market by putting this thing to 1% tomorrow.
Lets hypothesise that credit transmission is broken. Banks are holding cash, the stress tets had the wrong effect and now everyone is scared of a recession as they know some banks aren't funded well enough to cope. So money velocity collapses, but instead of a spike, as money velocity reduces, you just see this tick tick upward in the rate...
The Euribor over 0.9% is a problem. Not a huge problem but it is indicative of distrust amounst the banks ... ie they really do not wish to lend to each other except (at this point) a very high but not uber high rate.
As with the other posters comments, the high Euribor rate slows the 'velocity of money' eventually leading to the weaker banks going teats up as the illiquid banks will be unable to use the money churn to stay out of default.
It's the way banks work or in this case, don't work.
Yeah. If a rate of 0.899% for the EUR3M is serious signal for imminent collapse, what were 4,844% in 2001?, 4,665% in 2008? I am not saying the European interbank lending is not in a very very serious crisis and the post-stress-test hike certainly isn't a good sign per se. I'd also be interested in the volume of these transactions - imho if there is a hike in volumes also, wouldn't this mean that finally banks are in fact lending to each other again, if for a slightly more ambitous price than the ECB considers a "target"?
As yourself this question, what was the ECB ops rate during 2008?
Wasn't it 5% (I don't have precise recall but it was close to that or the carry trade didn't work.).
Comparatively, this current state of affairs is very similar. Not in comparable rates but in comparison to the ECB standing rate.
Yen is behaving in a different manner than usual. Today in Asian trading Every currency shot up against the USD. Rather unusual. Gold flattish.
I dont know- looks like maybe the chinese are getting out of the dollar?
If the Euro spike is purely due to liquidity crunch - why are Aussie and Kiwi up . Why is the Yen up?
The other hypothesis is maybe the market sees all the recent weak economic data out of the US and expects a weak jobless claims number and is anticipating some Fed action?
But - Bennie is in a tough spot. Reduce interest on bank reserves from the current 25 bp to zero? That will cause more money market funds to shut down and possibly cause a money market fund crisis . Is is worth it? probably not.
New round of fiscal package/monetization? Not yet - that is the big bazooka and why pull that out while markets seems happily tipsy?
So therefore I think the currency markets may be ahead of themselves if they are expecting imminent Fed action.
Mephisto,
Given this senario are you saying the EUR/USD would likely fall because people would lose confidence in the euro bank sector?
But since the rate increase is so little most people don't aren't even really noticing or don't care about the minor increase and therefore people perceive the Euro bank sector as healthy so they buy up Euros?
The Euro - like the stock makets - is a disaster waiting to happen. But until the disaster actually happens and is prominently headlined in the local newspapers - evrything will be deemed to be fine.
So evrything is always fine - until disaster strikes.
Then of course we all know the routine - Fed will monetize more trillions of debt , the banksters will be in dc looking for TARP 2 . The congress critters will ask - "how could this hapen?" in as amazed a tone as they can summon.
Market is wrong... I think...
Really?
Is there a basis for that, afterall, this is an interbank rate ... and somebody is in trouble ... and the sharks smell blood in the water.
If the trend continues, I would suggest that the slow fade to black will occur in the late Sept./Oct timeframe.
There are some technical fixed income reasons for this but if perpetual debt can't be 'rolled over' ... there will be hell to pay. Not just in Europe either.
Anyone know why 3-month EUR-Dollar rates would be near their 2010 lows, in the face of 3-month Euribor and Eur Libor rates near 2010 highs? Wouldn't this divergence contradict the theory that the higher rates emanate from a perceived immediate crisis in the euro banking system? Are Euribor/Libor-OIS spreads at crisis levels? Credit default swap premiums? Spot gold? If the 3-month rate spike is due to a Euro currency squeeze (even with SNB as a willing Euro seller), wouldn't that also be reflected in overnight rates, which are in fact plumbing 2010 lows? Thanks in advance for any advice on these issues..