European October Bank Funding Stress Worsens At Double September Pace

This morning, the ECB announced that use of deposit facility as of Friday hit €202 billion (while use of the marginal lending facility jumped to €4.6 billion, confirming that in addition to the USD shortage expressed by the 50-somethingth sequential increase in USD Libor from 0.418% to 0.42%, European banks now have a EUR shortage as well, and hence the FX repatriation and EURUSD levitation). As the chart below reminds, the ECB deposit facility usage is already past the second highest MRO cycle peak, having now surpassed the August peak high of €198 billion. But it's worse than that, because while the events of September lead to the first week of October when the whole world appeared set to implode until the FT rumor (since mocked repeatedly) of a European bail out hit on October 4th leading to a relentless market melt up, in the current post reset cycle, things are coming to a head much faster. To wit, the number of days it has taken since the deposit facility usage reset post MRO, since the beginning of the cycle, is now a mere 11 days: this is how long it took to go from €62 billion to €202 billion. In the previous, September, cycle, it took double that, or 20 days, to get from €76 billion to €210 billion. It seems that for all talk of European improvement, the key angle of the European "triangle of terror" - Bank Funding Stress, is now the worst it has been in all of 2011 and the worst since the first, and very much unexpected, Greek bailout in May 2010.

As usual, the market will be 4-6 days slow in processing this information.