Number Of European Banks Resorting To 1 Week ECB Liquidity Jumps To Two And A Half Year High

Tyler Durden's picture

It is not only the Chinese interbank market that has found itself in a liquidity vacuum. A quick look at recent moves in European overnight lending rates shows that in the past two weeks the key Eonia overnight rate hit a multiyear high of 1.549%, which was rather disturbing because as Reuters points out "Factors related to the end of the first half of the year, when banks tend to lend less as they square up their books, also kept cash prices over two weeks near the European Central Bank's main refi rate of 1.25 percent, money market traders said." Of course, concerns about Greece are a far more prevalent factor in the closed loop that is liquidity evaporation. Which is why the Eonia plunge to 1.091% on Wednesday would have been surprising in isolation, but not if one considers that during yesterday's ECB Main Refinancing Operation (MRO), banks borrowed a whopping €186.9 billion in 7 day funding at a fixed rate of 1.25%. This is €50 billion more than what was borrowed in the past week, and as the chart below shows, is the highest since January when the market was once again concerned about European exposure to Portugal and Ireland (then subsequently forgot all its concerns for about 5 months).


On the other hand, while the overnight rate dropped, this emergency liquidity scramble did nothing to improve longer-term liquidity: "While one-week Euribor rates were fixed lower at 1.22 percent on Thursday, from 1.258 percent the previous day, three-week rates remained above the refi rate at 1.28 percent with the key three-month rate unchanged at 1.526 percent. "The ensuing lower rate on the daily fixings is pushing short-end Eonias, and Euribors, lower but lending restrictions over the half-year turn and the ongoing problems in Greece are keeping cash prices in all the weeks at elevated levels with bids in two and three weeks close to the refi rate," said Kevin Pearce, a senior broker at ICAP." And perhaps the most notable observation in yesterday's MRO operation, is that the number of banks tendering for ECB liquidity surged to 353: higher by 118 from the week earlier as the liquidity contagion spreads, and the highest since September 2008, save for January again, when 371 banks were rushing to suckle at the ECB's teat (which itself is quite insolvent courtesy of the billions of massively underwater bonds it has used as collateral and direct loans it has made to Greek banks).

And here is why the number of MRO borrowers is likely to continue to rise:

"The ensuing lower rate on the daily fixings is pushing short-end Eonias, and Euribors, lower but lending restrictions over the half-year turn and the ongoing problems in Greece are keeping cash prices in all the weeks at elevated levels with bids in two and three weeks close to the refi rate," said Kevin Pearce, a senior broker at ICAP.

1 Week MRO borrowings:

Number of MRO tender banks:


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So Close's picture

I am considering writing a bankster - to street smart translation guide. I might start with items like.. Banker = Loan Shark, Loan = Juice, Interest = Vig, Credit default swaps = 3 card monty, We will crash the markets if you don"t pay = We will break your knee caps if you don't pay, Goldman Sachs = The Corleone Family, George Soros = The God father, Ben Bernake = Jimmy two times.. two times.. Etc.

Herd Redirection Committee's picture

Do it!  ZH is great at providing us the raw data, its up to us to re-process it for consumption for those who are interested, but unable to deal with the language of the world of finance.

Check out the latest from the Capital Research Institute "0% Interest Rates - Who Benefits?":

"From 1990-2007, individual debt levels increased dramatically, with credit cards, 2nd mortgages, student loans, and house flippers all doing their part in setting ‘the more leveraged the better’ trend.  To understand what assets will see their price rise the most, you have to understand that while national debts are growing, on the individual level people are deleveraging.  That means paying off their mortgage, selling the house and renting, or ‘downsizing’ their mortgage by selling their current house and buying a smaller house.  The next generation, with their severely dampened earnings outlook and weak purchasing power vs their parents at the same age, are still unable to afford real estate even at current US prices, so don’t expect them to put a bottom on the market, let alone raise it to new highs.

But again, the government is ‘making up the slack’ by borrowing record amounts, so don’t worry about the cost of essential goods like education, health care, food and energy decreasing.  You see, individuals use leverage primarily to purchase a home, and a small percentage also use leverage for speculating (they will tell you they are investing, though)!  But the government, well, it is borrowing money to fund its day to day expenses (the path to bankruptcy as we have explained many times).

Its day to day expenses include oil for the military industrial complex (so the price of oil will remain high or go higher), food (through the issuance of food stamps), health care, and education..."

Herd Redirection Committee's picture

I find that people have particular trouble understanding short selling.  I always try to start by saying that, when some people are losing money, other people are making money.  I tell them you sell short by selling something you don't have, and promising to give it back later.  You plan on buying it back at a lower price, returning the item (usually stocks/equities) and pocketing the difference.

I then tell them that big Wall St banks have sold record amounts of silver that they don't have.  They look afraid, and sometimes look over their shoulder (j/k).  I tell them I invested 20% of my savings in silver at $10/ounce, which means nothing to them, and then I tell them that silver has tripled in the last 2 years.  Again they look alarmed, because surely it must be time to sell if your investment has tripled!  :)

wandstrasse's picture

I am currently crawling through a 700 page TA book and practising with a FX demo account. Before that I thought 'short selling' is something which only sinister banks and hedgefunds are doing. I was SHOCKED when I started reading the book and trying the FX account ... IT IS JUST A BUTTON 'BUY' (long) and 'SELL' (short). I was SHOCKED that as a trader you GIVE A SHIT if prices rise or fall - you just got to read from the previous bars what happens next... Learning this was like steppin over a major, initiating threshold in my life, really, I am still digesting the shock.

Greeny's picture

If you found Stock trading is risky, then Forex

will surely purge your account in record time, trust me. :)))

I can f* guarantee this.

wandstrasse's picture

after 50 trades or so my demo credit is still about the same and I made some silly mistakes... however I do not know if I ever use 'real' money (I konw, 'real' fiat is kind of a contradiction...)

qussl3's picture

You are better off opening a real money account, but a small one.

Treat it as school fees.

Your decision making will be dramatically different when you have money on the line.

Also, beware spread widening and slippage which miraclously doesnt appear in some demo ccounts.

Version 7's picture

Precisely. Especially by JP Morgan, which by the way is about 8x Goldman Sachs.

carbonmutant's picture

Well if the Chinese aren't buying Euros, Who will?

Cvillian's picture

Is this similar to banks tapping the discount window because repo market is closed to them?


Herd Redirection Committee's picture

Training software.  But it is training for some of the rarest/most demanding duties on Earth!

They probably have a 'How to Suppress Rebellion' simulator!

carbonmutant's picture

Fukushima Event Analysis??

Westinghouse AP1000?

Ummm... I wonder if they would do a Modular Pebble Bed Reactor....


slewie the pi-rat's picture


if there is deleveraging, we wonder where the credit went, @ times.

Bansters-in-my- feces's picture

This sounds very bullish to Keynesian Kooks...

daneskold's picture

bullish as hell.

dollar tanks, euro rallies, es rallies with naz leading the way

hamurobby's picture

I just keep thinking the ecb will do a sudden about face and relieve the vacuum, they are about to implode.

Sambo's picture

Fukushima radioactivity is spreading all around the pacific.

All this talk of saving European, Chinese & American banks is like "worrying about the beard when the head is about to be taken!"


augie's picture

Normalcy bias brother. You are fighting an up hill battle. 

Rusty Shorts's picture

 - see my link above Sambo.

oldman's picture


You are talking to stones

We are all about money, money, money-----mainly 'my money'

We do not have time for subjects with social content

you'll have to find another place to post this


Franken_Stein's picture


Don't forget, some of these banks are also primary dealers of the Fed,

so you should also put up a foreign bank Fed discount window lending facility participation distribution chart.


Paralympic Equity's picture

Nothing of that matters, because the knight on the white horse came back with his bid...

KickIce's picture

Fox News reportering 7 bankers caught a 1,000 pound shark. (for realz)

They let him go as a professional courtesy.

(I'll be here all day)

carbonmutant's picture

The question is not whether Greece will default but who will follow...

carbonmutant's picture

The EU itself will disintegrate before that.

tallen's picture

Anyone else going short prior to friday might want to read this:

Lulzsec are planning to release their first "payload" of information on Friday, with the information being about:

"Top priority is to steal and leak any classified government information, including email spools and documentation. Prime targets are banks and other high-ranking establishments. If they try to censor our progress, we will obliterate the censor with cannonfire anointed with lizard blood."


Hoping for some juicy BAC fraud, which Wikileaks failed to show earlier this year.


GoinFawr's picture

OT, but anyone know what happened to the "Micro vs Macro" article?

Greeny's picture

AAPL is up, RIMM up 3.45% bitchez! :)

Cdad's picture

The spin machine over at the BlowHorn [CNBC] is kicking into high gear now.  The longer the list of economic disasters, the faster the criminal syndicate tries to usher folks into line to receive their paper crap.

So forget about Japan's destroyed economy and the further destruction to come from Fukushima.  Forget about the impending collapse of European debt and all the collateral damage to come [Bernanke's whopper of a lie notwithstanding].  Forget about the resulting dissolution of the Euro Union.  Forget about the fact that talks just broke down on the debt ceiling raise.  Forget about the fact that the $7 trillion stimulus plan enacted by DC and Ben Bernake has failed.  Forget about the certainty of interest rate spikes enforced by the actual market that are now in the wings.  Forget about peak earnings.  Forget that the BlowHorn [CNBC] has become a diffusion agent and utterly disconnected from real, relevant financial news.

The Cramer's and the Charloffs and the Nanosecond Money crews are out in full force ushering people into the high beta trade.  The rounding up of the sucker fish is now frantic.  

The last rally is the one built on the dead bodies of credibility that are piling up in the scramble of the last HFT scalp...occurring right now.

Greeny's picture

What you call fraud? Coca-Cola shares are fraud? Get a clue, freak.

Cdad's picture

What you call fraud?

Releasing oil from the SPR to induce price disruption is a free market fraud.

Inducing a short covering rally on Japan on the theory that complete destruction of their economy is a fraud.

Almost every mortgage CDO issued since 2004...fraud.

Raising earnings predictions while throwing a blanket over what are clearly peak a fraud.  

Burying the Fukushima story is fraud.

Robbing future generations to pay for profligate living in the fraud.

Perverting the T bill market through POMO with Fiat printing is fraud.

The Greek economy is fraud, as is piling more debt upon the fraud.


Cdad's picture

The move in the market at 3 pm est...was fraud.  ES/SPY induced, PPT stick save...supported by yet another Greek rumor carried by Reuters.

By the way, you can tell just how sick the market truly is when it can move like that.

Fraud.  The integrity of the market is at zero.  But don't take my word for it.  Go long right now and learn it for yourself.


Deepskyy's picture

Brother Cdad you have forgotten rule #1 of Wonderland.  "Everything bad is transitory."  No matter how bad the news is today, tomorrow will make it better because well, I'm not sure how but I know it will.  Just go home from your cube later today, pour a drink and settle into that butt print on your couch and flip on the idiot box to the next big thing in (sur)reality tv!

Rule # 2 is of course "don't step on the mome raths"


Village Idiot's picture

"If they try to censor our progress, we will obliterate the censor with cannonfire anointed with lizard blood."

How about a digital hollow point made out of silver, tip filled with pig shit?

Black Forest's picture

The medium-term EONIA upward trend, say since January, is unbroken. That drop to 1.09 could be statistical noise.

Curtis LeMay's picture

Perhaps this cash run has something to do with the stress test euroland is feigning going through right now even as we speak?

Remember, a couple of days ago the Bundesbank demanded that the stress tests of 91 euro-banks must now also include the "realistic" possibility of one or more countries in euroland going to the wall? Well, the fall out from that is that euroland's banks would need far, far more liquidity than they have on hand to be able to survive such scenarios.

These banks simply rigging the books by borrowing short-term ECB paper until the stress test is over in a few days, promptly to be returned to Frankfurt thereafter of course, so that they "pass with flying colors"?

You be the judge.

= = = = =

This could also be playing a part...

UK banks abandon eurozone over Greek default fears

18 June

Senior sources have revealed that leading banks, including Barclays and Standard Chartered, have radically reduced the amount of unsecured lending they are prepared to make available to eurozone banks, raising the prospect of a new credit crunch for the European banking system.

Standard Chartered is understood to have withdrawn tens of billions of pounds from the eurozone inter-bank lending market in recent months and cut its overall exposure by two-thirds in the past few weeks as it has become increasingly worried about the finances of other European banks.

Barclays has also cut its exposure in recent months as senior managers have become increasingly concerned about developments among banks with large exposures to the troubled European countries Greece, Ireland, Spain, Italy and Portugal.

Mediocritas's picture

There's no real need to worry about Chinese liquidity because the PBoC can and will act as necessary, plus it has a lot of breathing room.

Very different story in Europe. The ECB has demonstrated in the past a complete lack of either willingness or ability to act as required, instead it has been the Fed coming to the rescue (and now, apparently China).

So regarding China, be alert but not alarmed. But regarding Europe, be alert AND alarmed.