Another Day, Another Worsening In European Interbank Lending: 3M Euribor At 0.896% From 0.893%
With each passing day, the interbank ledning market in Europe gets worse as the shadow economy's unravelling accelerates: 3 Month Euribor just hit a fresh high of 0.896% versus the prior 0.893%. In relates news, ECB said in its July Bank Lending Survey that banks once again unexpectedly tightened credit standards in the second quarter, as the sovereign debt crisis affected their ability to obtain funding even while the economic recovery sparked a pick-up in demand for loans. We fail to see how banks' unwillingness to lend in light of knowing full well all their counterparties are insolvent save for the ECB's perpetual backstop, is unexpected. Elsewhere, the WSJ discusses how "rate swings sting Europe's borrowers" and finally catches up with a theme we have long discussed, namely that rampant, and currently unsustainable, foreign-denominated borrowing in Europe's peripheral countries is causing huge pain for borrowers, and will soon lead to major dislocations in the FX markets once again as the creditor banks (all of them stress test urban achievers mind you) find themselves sitting on trillions worth of goose eggs.