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European Interbank Liquidity Gets Worse: EUR Libor Passes 0.80%, OIS Surges To Highest In Over One Year
3 Month Euro Libor continue rising: for the first time August 2009 the rate is over 0.8%, hitting 0.80813%. More tremblingly, the far less manipulated OIS spread (no trimming of outlier percentiles) also jumped by an even greater amount, thus actually pushing the Libor-OIS spread down to 0.33331%. Another indication of the sudden EUR scarcity which both we and Nic Lenoir discussed in depth last week, is the plunge in the allocation by European banks toward the ECB's deposit facility: after hitting an all time record a month ago at €384 billion, a series of liquidity withdrawal actions have pushed this number to just over €58 billion: the scarcity of euros within the financial system is starting to be felt everywhere as banks no longer even have an excess of cash to deposit for risk free "storage." Market News describes this deterioration in liquidity as follows: "Eurozone interbank markets are likely to be dominated this week
by speculation about, and the eventual publication Friday, of the EU
Commission's bank stress tests. There are concerns Irish banks, German
Landesbanks and the Spanish Caja could all perform badly in the tests." Luckily, all is good in Greece, where one version of G-Pap (the finance minister) announced earlier that all banks are expected to pass with flying colors. Somehow he said that with a straight face, and without breaking out in hysterical laughter.
Below is 3 Month Libor over the past year:
A chart demonstrating the abolsulte and relative spread between Libor and OIS:
And a blown up chart of OIS:
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Someone who heard G-Pap coughed and shouted "Μαλακ?ες!"
It is such an important topic and ignored by so many, even professionals! I do enjoy writing but it just seems like the first 10 to 15 minutes are lost simply just trying to figure out how to begin. pellet making machine
Are you trying to unload your EU/CHF position?
I could seriously say the banks are going to pass with a straight face if I foretold the outcome before the tests even happened. Also the tests aren't taking into account sovereign debt holdings. In other words, folks that are holding Greek paper can still say they are holding it with 100% return and no/little haircut.
"In other words, folks that are holding Greek paper can still say they are holding it with 100% return and no/little haircut."
Another way to look at this - the Greek banks were smart enough to not hold any Hellenic debt on their books?
If you thought the US ST was a farce...
We seem to have moved very quickly from a dollar shortage to a euro shortage. The stunning EURUSD move from 1.288 to 1.298 this morning would sugget to me that everyone is holding EUR.
Frankly I don't know what it means but it's hard to be bullish when the financial system cannot decide which currency it hates least and yet refuses to lend its money. Analogy - spring 1931 anyone?
How is it possible that any of these countries could perform badly in these stress tests? Is this propaganda just being built up so that when the 5 star health reviews come out from the rigged tests that everyone is just soooooo relieved? /Pffffft/
They better start printing and right quick.
Euro action driving the POG, both directions
Using gold to buy Euros?
Sounds like Bilderberg is going all in on this one...
Question -
Wouldn't this liquidity squeeze among European banks also be reflected in the rate charged for 3-month U.S. dollar deposits there, as reflected (say) in EDZ10? That contract hit a new high last Friday (inverse to rates). Nothing snarky intended here, just an honest query. Thanks!
So, while is might sound a little callous, save your sentimentality for your prayers. If you want to do some good, you don't need to look much farther than your own family or neighborhood to help someone who needs it. All the overt pronouncements of sentiment are pretty shallow water compared to the people who anonymously wade deep into the cold water to help another person with action instead of empty words pmi certifications | VCP-410 | 350-001 | 640-802 | SY0-301 | 70-680 | PMI-001 | 642-813 |
Interesting to read all the new responses, thanks for all the current news and updates. Hope to read more very soon.
moulin farine