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European Funding Crisis Accelerating
We discussed the sudden and scary drop in the EUR-USD cross-currency basis swap last week and how it is perhaps a cleaner view of the funding crisis in Europe than the delinquent Libor market. Since our first discussion, the 3 Month EUR-USD basis swap has widened even further - only worse in the heart of the crisis in Q4 2008. As if that was not enough, GDP-weighted European Sovereign risk is back up to its highest levels ever as the clear message from the markets is the ring-fencing and backstopping of sovereigns and financials respectively is simply non-existent.
The cross-currency basis highlights the difficulties in funding differences between USD and EUR - clearly funding in EUR is possible thanks to emergency (and temporary) ECB measures but they can't print USD and so the stress shows up in the basis swap...
and European sovereign risk (GDP-weighted) is back at its extreme highs.
Charts: Bloomberg
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+ 1.35 and dropping...
Stolperized!!!
For some reason this is all bullish. I just haven't figured out how
Go back to watching Mad Money re-runs.
Well your a ray of sunshine aren't you
Well ive been to Egypt and ive never seen "denial" like that. LOL
If you're serious, you should change your user name to: CommentingWithNoRealKnowledgeOfTheIssue
Slow burn bitchez
About time!
That is not what Larry Fink said...so it cannot be true.
This isn't just a funding problem. It is a dollar funding problem that the ECB can't fix.
Has Goldman's trade been stopped out yet?
Jack Welsh is on Bloomberg right now. He is making faces like he just pooped in his pants!
yeah?...and futures ramped with now Dow 12k+, SPX 1250+.
It doesn't matter when the "market" is a + 10,000% overleveraged program buying farse.
It's all a rapid-flood-gate-opening disaster waiting to happen and millions of "401k lemmings" are gonna drown...again.
However, the crepto's will be just fine...especially our Congressional "representatives" as they get their "legal" insider "Blue Horseshoe" phone calls before zero hour.
f'ing BS...all of it!!
I've maintained mt bearish stance for a while. But that sure looks like a bullish pennant building up on the S&P.
Looks like a bear flag in the XLF though - as well as major euro banks, credit agricole, bnp paribas, and soc generale - I think they lead
Yeah I agree with you there. There are a lot of mixed signals for sure.
http://www.surlytrader.com/political-dance-of-denial/
This may be the time J Rogers bet on the dollar pays off.
For me i will act on a dollar rise to pick up more PM. Am i wrong to think dollar strength = lower gold price?
You are not wrong in a sane market. But, we are living in Bizarro Land...
Gold price is down in USD, today. Though it just seems to be going sideways to us.
http://www.kitco.com/gold_currency/charts.htm?USD
I like to hit the pawn, coin and indy gold buying shoppes when news is dollar strong or.... you know. Those guys get nervous and you can pick up AU below spot -sometimes. Little bit here little bit there.
Euro will be 1.40 in a week. Like always, just another article and chart to shake out the longs. Germany must have Euro to sell all her products to the South. That is why there is a Euro in the first place and why there will always be the Euro. Remember, debt can always be extended and forgiven before economic engines are shut down. Look for a Euro Bond formation by the end of the year.
Debt cannot always be forgiven. It can be forcibly haircut. Then the debtholder's assets are reduced, then his ratios go down, then he can't lend, then the economic engine makes a squealing shrieking sound as it comes to a stop.....
I see your point that things are manipulated to screw people out of money, but they are monkeying with the foundations of the whole thing...IMHO
...precisely. Then the debt issue will be negociated by "other means".
Whats the problem? - wasn't it the complete destruction of europe that allowed the usa to grow in the late 1940's, 50's and 60's?
Yeah right, so the debt has been wiped out thanks to Empire manufacturing. Stop reading tea leaves and churning, big picture, big picture guys! The big picture is in demographics long term evolution of debt, of trade deficit, primary surplus we need a miraculous technology to get us out of this mess without defaulting (default includes debasement). We are in classic end cycle, read Fischer studying 800 years of inflation, crime rate bastardy rate, demographics, debasement, power struggle between the king and the princes. Debasement has the following symptoms: enrichment at the top, misery at the bottom, crime rate soaring, weak king but strong princes resisting taxation, basic necessities inflation, but manufactured goods deflation, outlays versus receipts imbalances and base metal content rising in the coinage versus precious metal, ending in accelerated inflation and political instability. We have all of it in modern context. Now if Empire manufacturing good numbers wipes out all of our problems good, I am glad, but I am unfortunately not that optimistic that debt can be wiped out just out of sheer productivity gains (consumer debt is the desease rembember so do not hold your breath on that.). That leaves debasement. That being said this a material science revolution happening now and there are ways to get rid of oil (Thorium), but it will not come in time to avoid more currency instability..
If I am correct at 121 bps EU banks are get less for EUR lent than they pay for USD borrowed, because in the meantime ECB lowered theIr IR
NASDAQ megaphone pattern on daily chart indicates a big move lies ahead.
SP500 monthly chart remains bearish and USDX weekly remains bullish, so it’s only a matter of time until the market makes its move.
http://stockmarket618.wordpress.com
Do basis swaps really give "a cleaner view of the funding crisis in Europe than the delinquent Libor market" when the ECB has a dollar swap line with the FED* & can supply USD liquidity directly?
(& perhaps other euro area CBs have similar facilities...)
*http://blogs.wsj.com/marketbeat/2011/08/25/ecb-taps-fed-dollar-swap-line/
Also can anyone explain the second chart. I can't figure out what the lines are. :s