So Much For The Bailout - European Funding Situation Worst Since March, As ECB Deposits And Emergency Loans Soar

When we observed yesterday that the ECB's deposit facility usage has passed €300 billion for the first time in over a year, we took it with a grain of salt: after all the data may have been compiled before the announcement of a global liquidity intervention by the Fed and central banks. Specifically, we said "Needless to say tomorrow's deposit facility update will be critical because unless there is a major drop in usage, it will confirm that in addition to a USD-funding shortage which should have been ameliorated even if very briefly, other EUR-based risks are being observed by Europe's banks, who better than anyone know what the interbank system risks are, and the Fed's USD liquidity injection will have failed to achieve anything except to ramp risk higher for a day or two." Today we got the update for the two key ECB liquidity lines for the day after the bailout. And things are actually much worse than even we expected. While the cash flight continued, indicating that absolutely nothing was fixed from the banks' perspective, and the ECB deposit facility rising to a multi-year high €314 billion or €10 billion higher overnight, another key factor was the ECB's Marginal Lending Facility - the last ditch "discount window" equivalent - which saw its usage explode from €4.6 billion to €8.6 billion overnight, or the highest since March. It appears that in addition to a dollar funding crisis, there is a broad EUR liquidity crisis as well, with the bulk of the banks continuing to pull cash from the domestic interbank market (even if USD funding issues are resolved briefly), forcing the weakest links to resolve ever more to the ECB to recycle the very same cash that other banking peers dump with it. Naturally, this means that the funding situation as seen from the lens of the key market participants - Europe's banks - just deteriorated materially after the so-called bailout. It also explains why this morning we are getting a repeat rumor (soon to be denied) that the ECB has proposed to loan €270 billion to the IMF, as nothing has been fixed and the authorities are well aware.