Guest Post: Euribor-Libor Basis Swap Highlights Funding Stress For EU Banks

Tyler Durden's picture

From Peter Tchir of TF Market Advisors

I can't take credit for finding this graph of Eur Basis Swap [the cross currency basis swap between 3M EURIBOR and 3M LIBOR], but it seems to be a decent indicator of European banks having difficulty funding their USD business.  Maybe I'm reading more into the chart than there is, but that is what I see going on.

It makes sense with all the other data that is out there and the anecdotal evidence that US banks are pulling back their lending to European banks.

Germany just announced they are preparing to prepare for a Greek default (my take on Merkel's statement). I have been arguing for a long time that they have to let Greece default and then try and pick up the pieces in a less complex and less intertwined world.

Chart: Bloomberg

ZH addendum: we note that the CP markets (non-financials) is not showing quite as much stress with 7-day EUR Euro commercial paper rates remaining well above USD Euro commercial paper rates but not systemically drying up yet - if we see this start to crack then the transmission channels will have well and truly started contagiously shrieking - though we do note that the absolute levels of these two rates has jumped considerably recently as general liquidity dries up over there.

Chart: Bloomberg

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BaBaBouy's picture

Stinking EURO Quagmire ...

Central Planning Gone Awry.

And their only Response is "Manip Da GOLD".


Baba Says Have A Beer And Watch And See Who Wins ...

Robslob's picture

But "what does that mean"?


Talking bears anyone?



Zero Govt's picture

No just sit back and look in wonder at the genius of Trichets work in the above charts ...those 2 bank stress tests and fuffing around Europe like a headless chicken for over a year clucking he'd "Stop contagion, Stop Contagion" can be seen as almost Art Neveau takes a highly educated mind to see and fully appreciate the Euro bankers shitting their pants in the above charts

slewie the pi-rat's picture

well, the moQ is still somewhere or other, and THE Council which has promised elections w/in 8 months is demanding his surrender as well as those who are still armed and ready, willing, and able to keep fighting 
US "intelligence" is now saying he is in some desert oasis, so i guess that place will get "surgically flattened" pretty soon if all the "bad guys" don't come out with their hands up
the press is now reporting a "total" of 6 who were "rendered" to libya on condiefuking rice's watch "under" g.w. "puppet" bush
here's the recent bodycount: At least 30,000 Killed, 50,000 Wounded in Libyan Conflict
anyone interested in "doing the math" only needs to "estimate" how many were "combatants", subtract, and get the innocent civilians not protected by the ~10,000 NATO bombings
and, as we remember the "reason" that the USA now has a policy of torture and denial of, NOT "human rights", but denial of LAW & JUSTICE to all, please consider what the best freaking presidential candidate of the century has to say about this 9.11 weekend~~~yeah, the guy who has been on the ballot in all 50 states for the last two elections, ralphie-boy nader:
The Empire is Eating Itself » Counterpunch: Tells the Facts, Names the Names

msmith's picture

Well the bullish USD seems to have arrived.

EURUSD looking very bearish.

Interesting day for the ES today.  Only a matter of time before the larger breakdown occurs.  It may be unfolding now.

gguillory75's picture

If Greece defaults over the weekend, what would happen to the euro?

gguillory75's picture

I'm wondering about the mechanics of it - obviously it would decline, possibly severly.  Is it a matter of a rush to safety (that is, dollar assets)?  Because that would exacerbate the dollar funding issues being experienced in europe...

long-shorty's picture

yes, Mr. Smarty-Pants Know it All Gene, he is seriously asking. what do you think will happen?


Clorox Cowboy's picture

Buffett just stumbled out of the tub muttering something about "picking up some yogurt"??

youngman's picture

The Feds will keep their window open for the European banks...It has been open...and it will be used heavily.....he we go again...

JPM Hater001's picture

When I was in basic training we had a little chant for marching down the days to graduation.  Seems appropriate here:

Here we go again

one more time again

marching down the avenue

two more days and WE'LL be through

Sound off 1-2

Sound off 3-4

Bring it on down now 1-2-3-4

Greek Debt!

plongka10's picture

The Fed, maybe. OT, commercial banks in the UK have seen 500 billion GBP cross the ocean back to Daddy in the last 18 months.

cocoablini's picture

Make sure you are positioned in FDIC banks, have some cash laying about, invested in counter cyclical equities like gold miners and make sure you can count on your brokerage not going in smoke.
You are guaranteed your stocks, but not cash in brokerages in SIPC rules. So running to cash unless you transfer it out now to FDIC is no guarantee. The brokerages can lose all your cash and its only Self-Insured.
Also, if you have an option account, you may have your stock loaned out from underneath you and "lost"
Remember, hanging onto your cash will be the prime directive as governement amd banks are going to try and confiscate it