Something to keep an eye on — there’s been a bit of a bump in bank borrowings from the ECB’s overnight Marginal Lending Facility:
Mostly because we can’t see an obvious explanation for it.
At €2.82bn it’s a jump up from the previous day’s €555m (or €90m before that), while overnight deposits are high but have been rising, mostly predictably, through mid- to late August.
Here’s the thing: MLF borrowings have spiked to past the €1bn mark already this month, reaching €4bn on 10 August. So it’s not unheard of even during the current market stress. Still, at the time this seemed to be longer-term liquidity liquidity expiring on one day, and banks borrowing the difference overnight in the MLF, then using them for a fresh six-month refinancing operation. We can’t see any similar effect for the current spike. It does follow a grim day for the credit market taking on bank risk though after the Markit sub and senior financial indices hit record wides. Thoughts welcome.
It’s strange because tapping the MLF bears a strong stigma. Though they used to say that about tapping the ECB for dollar funding…
(Latest results for that operation are out later on Wednesday. We’ll update here when we get them)
Update 1005 UK time — zero bids at the ECB dollar swap. We were expecting as much given the trouble over last week’s $500m…
FX swap lines to the rescue? – FT Alphaville