This is not a good sign.
If the European Central Bank had been trying to stabilise the Euro overnight deposit rate in recent weeks — as most central banks are wont to do during a crisis — then they’ve failed.
Via Marc Ostwald at Monument Securities — some hefty volatility:
As Ostwald explains:
This sort of volatility spells big trouble, which is further underscored by the very large EUR 2.85 Bln borrowing volume from the ECB’s marginal lending facility. This, as the 2007 and 2008 post-Lehman experiences demonstrated, is how crises start – thanks Ben for all that excess liquidity, and collectively thank you to all the G7 ex-Canada leaders who have failed to grasp the nettles of reform opportunities over the past three years – “a faint heart never won a fair lady” – in this case the fair lady is global financial stability.
And as Ostwald’s chart-note should suggest — this kind of volatility will also further complicate the ECB’s much longed-for exit. Yet. A. Gain.
Related links:
The ECB exit hurts — hurts like negative €12.6bn – FT Alphaville
Funding liquidity risk: definition and measurement - BIS working paper