Funding Stress Contagion Spreads - European Banks Collapse To 11-Month Lows

Yesterday we exposed the globally contagious spread of funding market distress into the credit risk of major US banks, and today it has accelerated, spreading to Europe's banks as their stocks crashed to the lowest in 11 months...

Deutsche Bank is leading European banking's collapse...

But this is a serious move for the broad EU financial system...


Credit risk is breaking out...

As Credit diverges extremely bearishly from stocks...


And it's about to get even worse...

As three-month dollar Libor extended its streak to 32 straight increases, though the rise in the setting is the smallest since March 8. The crucial USD Libor-OIS spread rises to 56.8bp, widest level since May 2009 (as 3M Libor at 2.2856% is the highest since November 2008, vs 2.2711% prior session).

As we noted yesterday, the key is whether rising Libor rates will fuel a funding crisis - something we have been worrying about all year (as we detailed above with the blowout in the Libor-OIS spread)...

“We usually don’t see this kind of divergence in rates without some sort of credit issue,” said Margaret Kerins, head of fixed-income strategy at BMO Capital Markets Corp., referring to Libor’s rise versus OIS.

“At what point does all this become damaging and how far does it go? That is the issue.”

It appears to be damaging now..

“There has been sort of the perfect storm of factors tightening financial conditions,” said Russ Certo, head of rates at Brean Capital in New York.

“Banks do have tremendous liquidity still, but it’s at a higher price.”

But, but, but... "fortress balance sheets"?


BanksterMind Thu, 03/22/2018 - 10:31 Permalink

Listen to me and listen to me good. Time to cash in and preserve the capital by buying real stuff. Buy half a pair of shoes like in 1923's Weinmar, if you have to. Just buy something real like gold.
Your paper is about to turn to confettis.

When you're done, start investing in yourself and in your kids.

And I'm not talking about school, quite the opposite. Time to get real skills to add value to others.

All the stuff they won't teach at school:   Entrepreneurship for kids.  (age 8 to 88)





itstippy Thu, 03/22/2018 - 10:41 Permalink

European banks have a vast pool of highly liquid Levered Deravatives and Credit Default Swaps to draw upon if they need to raise cash quickly.  They have fortress balance sheets; there is no need for concern.  There's never been a better time to put your life's savings into European banks and watch it grow.

Tyler is an alarmist.  European banks have top men running things.  Top.  Men.  

Easyp Thu, 03/22/2018 - 10:46 Permalink

I am willing to take some personal investment pain for the pleasure of watching Deutsche Bank sink.

Another reason why I backed Brexit!

Yen Cross Thu, 03/22/2018 - 11:25 Permalink

  The rats sure are scurrying back into UST.  Equity markets look like Donkey Kong on roids.

  All of the macro was shitty last night, and this morning.

Righttoarmbears Thu, 03/22/2018 - 12:46 Permalink

DB has already been bellow 10 in the last 12 months, this is hardly a surprise. is like watching a Circus act with a huge elephant balancing on top of a big red and white stripy ball, a chair in its trunk, a clown on the chair with a ballerina balanced on his shoulders juggling fire sticks, and the FED, ECB, etc keep playing the music and throwing more fire sticks to the ballerina. when a true lack of liquidity hits it will be like a mouse running on stage, and all fooking hell will break lose.

fiddy pence ha… Fri, 03/23/2018 - 03:16 Permalink

As I understand it, this giant ponzi

set up by the BIS in Basel Faulty,

needs calm, and continued genocide

of the middle class be damned.

Now Trump has dropped a trade war

grenade into the buffet, and there

goes everybody's appetite.

Middle class Schadenfreude, espec

if Douchebank goes flat. That's the Euro

done. Re-set. start from zero. Get a job

in China until the dust clears.