Libor Rises Again, As European Jitters Resume, Europe Blasts Moody's Downgrade; ECB Now To Impose 5% Haircut On Greek Collateralized Bonds

Tyler Durden's picture

The primary indicator used by Jim Caron in his daily letter to assuage client fears about contagion, 3 month Libor, has taken a step for the worse. As Market News reports: "Dollar and euro 3-month LIBOR both rose Tuesday,
with the dollar rate at its highest since July 6 last year and the euro
rate at its highest since Dec 29 2009. The euro overnight LIBOR rate rose 32.13 basis points, due to the
end of the European Central Bank maintenance period, while the 3-month
LIBOR rate was up 0.19 points." Adding to increasing short term funding concerns was the fact that going forward the ECB will take a 5% haircut on all Greek bonds posted as collateral with the ECB. As this amount has surged recently, Greece will be now forced to post yet more bonds just to cover the spread. Luckily, Greece is allowed to post any collateral at all, as the once-prudent ECB now allows for any worthless collateral to be pledged for cash on its balance sheet. Very much like our own Fed. Lastly, yesterday's Greek downgrade by Moody's drew harsh criticism by Europe. As Reuters reports: "Moody's decision came at quite an astonishing and unfortunate moment" according to Olli Rehn, who added "the downgrade had not taken into account latest developments in Greece." On the other hand, seeing how much credibility (none) the Greek government has, after having been caught lying about its deficit for years, is this really a surprise?

More on overnight funding troubles from Market News:

The Spanish banking sector has been in the spotlight, with reports of liquidity drying up for the Spanish Caja banks and with downbeat comments from government officials.

The trend of European borrowers being charged high by dollar lenders, who are concerned about the fragility of sectors of the EU banking system, remains in place.

Euro 3-month LIBOR/OIS spreads, however, narrowed just over 0.1 basis points Tuesday while dollar spreads widened 0.3 basis points and dollar spreads widened just under 0.2 basis points.

And some more on Europe's response to Moody's being just 6 months behind the curve this time:

"Moody's decision does not in anyway take into account Greek commitments or the negative consequences, which were considerably reduced following the adoption of the (bailout) programme," Rehn said.

He added that he had discussed the matter with EU Commission President Jose Manuel Barroso and Internal Markets Commissioner Michel Barnier, saying that the move "revived the debate over the issue of ratings agencies".

"The Commission is going to look into the question of competition in this sector, where there is a very strong concentration (of players). We are also going to look into transparency in the methodolgy and the question of conflict of interest," he added.

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jbc77's picture

What a joke. Now again today the euro is up? Can anyone tell me what planet I'm on? Central bankers must be hard at work again loadin' up their balance sheets full of sh1t ass euro's.

Temporalist's picture

Clearly it is Bizzarro world where lying is perfectly acceptable, nay, expected, and magical money and derivatives of debt derived from debt make some people wealthy while driving the majority of people into poverty and unemployment.

Mako's picture

Cycles and cycles within cycles.   Life is more interesting this way.

doublethink's picture


Auf Wiedersehen


Angela Merkel's government threatened with collapse


jbc77's picture

Whats frightening is the fact that when this no volume market cracks, it's going to crumble. I'm fairly certain market rallies based off central bank FX manioulation cannot be sustained forever.....or can they?

John McCloy's picture

I agree with you. A continued rally predicated on Euro strength? Their riots are right around the corner and even in our dilapidated state we have a larger economy albeit it broken. How much money have central banks spent just to prop the Euro? It is still not assauging fears and so many broke nations so close geographically is a prelude to war.
Just look at BBY today. Another soon to be bankrupt company with expensive products, Monstrous retail space and leasing costs and they are having their lunch eaten by Amazon. Factor in Americans losing jobs and ending unemployment benefits and sprinkle in a rising dollar you have double mega dip.

jkruffin's picture

Empire Manufacturing came in lower again.  Forecast was 21 and came in at 19.6, showing ZERO manufacturing growth.


I can't wait until Thursday to see how badly manipulated the CPI is this time.

Tense INDIAN's picture

i am really confused ..isnt a Head and Shoulders pattern a perfectly "Normal market " behaviour...


or the Manipulators are deliberately drawing out that pattern ...just for fun or for the sake of technicals.....

Robslob's picture

Since almost all retail traders have been leaving in droves it will be the clash of the Titans II as institution vs. institution in the largest tournament of musical chairs will determine the who will be holding the bag for the entire stock market...lmao

John McCloy's picture

Amen. The 5 biggest bagholders in history with the Big 4 Banks + The Fed. And now there is a legion of pissed of hedge funds short squeezed to death over the past year salivating at turning them against one another. The plates keep spinning until someone takes their ball and goes home. They sure as shit cannot expect 401ks to pay their way as in the past.

luigi's picture

"On the other hand, seeing how much credibility (none) the Greek government has, after having been caught lying about its deficit for years, is this really a surprise?"

Interestingly enough, you could take out "Greek government" and put in his place "Rating Agency", "Goldman Sachs", "ECB", "FED", "Bernanke", "Draghi", "Barroso"... whatever, and the sentence would maintain its validity...

Zina's picture

Rising Libor? It doesn't matter! What matters is the fact that NORTH KOREA will be SMASHED today!

Brasil will SMASH North Korea national team, today in Johannesburg, for the World Cup!

I hope Kim Jong il doesn't sink some brazilian vessels in retaliation...

By the way, CALA BOCA GALVAO!!

Catullus's picture

Moodys is a ward of the state. Just another skirmish in the currency war.

SteveNYC's picture

Sounds like "If we don't get the ratings we want to sustain the Ponzi and suck pension/mutal fund bond investors in, we are going to roll around on the ground crying, banging our fists, and shitting our pants"


Oh well, I'll give them credit for beating the shit out of Moodys, perhaps the end will justify the means here....or not.

cwild's picture

Anyone notice the underperformance of banks over last 2 sessions. UYG normally moves a bit more than >2x SPX, but today just -1.9%, vs SPX +1.3%.. ominous :o

Long SKF US as libor goes north.

Since 1800.. wildcapital.