How Europe's Solvency Crisis Is Morphing Into A Liquidity Crisis: Spread Between Overnight And 3M ECB Repo Blows Out

Reader PP submits:

In the last week I have been hearing things from pals regarding funding crises in money markets and among banks, both within europe and across us/europe (fits with Fed relaunching EU swap lines). Attached chart will scare you guys.  This is a little more subtle but look at the second chart, the one on the right... EU libor vs repo is widening (pink line) in last 2 days, and also dollar libor is rising faster than euribor (decline in blue line in right chart), ie dollars are harder to come by vs euros in the eu interbank market.  expected.  but most strikingly, the spread between 3m and o/n repo in europe is skyrocketing (yellow line), which means it is getting harder to secure funding on a 3 month basis using ECB collateral vs going to the window overnight.  bad bad bad.  means players are less inclined to lend collateralized money out at 3mths.  We are watching an insolvency crisis become a liquidity crisis in real-time.