After yesterday’s rather spectacular move in dollar Libor, it came as no surprise this morning that the BoE was going to flood London with dollars.
Two repo auctions were held by the old lady this morning: a $10bn overnight auction at 8:15BST and a $30bn one week auction at 8:45BST. Another $30bn 1 week repo auction is slated for Friday.
But, demand was, to say the least, thin.
The cover ratio was 0.75 on the overnight operation and 0.45 on the weekly.
Which should manifest itself as a big fall in Libor today. Banks either no longer need the funding, or else they’re getting it elsewhere. It certainly seems to give some weight to the notion that a big part of the dramatic squeeze in interbank lending yesterday was a quarter-end phenomenon.