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’Dollar signs and European bank stress
Whatever happened to the dollar funding crisis?
If you’ll remember — central banks restarted dollar swap lines in May, after fears of banks’ exposure to bad sovereign debt dried up liquidity in the market.
July 1 could be the day liquidity dies
We’ve mentioned July 1 a couple times before.
That’s the day the European Central Bank’s first and largest 12-month Long Term Refinancing Operation (LTRO) will run out. It’s also the day Barclays US money market analyst Joseph Abate expects three-month dollar Libor to start rising,
The price (and cost) of bank funding in Europe
More on the topic du jour for the banking sector — funding.
Citigroup says the issue isn’t so much the availability of capital — The Fed has after all, reopened its dollar swap lines and the European Central Bank seems likely to replace its expiring 12-month repo facility with more short-term liquidity — but cost.
Front-running money market fear
You are probably familiar with parallels between current money market stress and that experienced post the collapse of Lehman Brothers in 2008.
But there’s a key difference, as highlighted by the fixed income analysts at Deutsche Bank.
Calming down on bank credit risk
Three-month dollar Libor fell just a bit on Friday, breaking with its unsettling rise over recent days, a trend which may have been related to fears over US financial reform and European sovereign exposure.
Onwards, upwards, forever, European liquidity
On Tuesday, FT Alphaville presented you with some whining banks.
They were complaining about the inexorable rise of Libor and the punitive cost of central bank liquidity. No financial firms, they said,
Cosmic European commercial paper
There’s been much focus on surging Libor of late, but there’s another (sky-high) money market indicator to focus on.
The rate for 30-day European Commercial Paper (ECP) has surged in recent days, jumping 14 basis points this week to 48bps.
Libor life-savers?
Is that an ECB rate cut on the horizon? Markets rallied somewhat on Tuesday, on talk of an intervention to the tune of a 50bps slice off the main refi rate. An ECB spokesman declined to comment on the speculation.
Beware the ides of money funds, Libor
Libor laments notwithstanding, this was a big jump on Tuesday:
RTRS-LIBOR THREE-MONTH DOLLAR RATES FIX AT 0.53625 PCT VS 0.50969 PCT ON MONDAY -BBA
11:56 25May10 RTRS-LIBOR THREE-MONTH EURO RATES FIX AT 0.63875 PCT VS 0.63438 PCT ON MONDAY -BBA
11:56 25May10 RTRS-LIBOR THREE-MONTH STERLING RATES FIX AT 0.70813 PCT VS 0.70188 PCT ON MONDAY -BBA
Ouch.
Those Libor laments in context
You’re looking at two indicators of interbank funding pressures.
The first is 3-month US dollar Libor. The second is the five-year euro-dollar basis swap, a basic gauge of demand for US dollars,
Libor’s slow grind higher
Libor is back.
The FT reported on Monday that we are due a sharp rise in dollar interbank offered rates, on account of renewed credit risk fears around European banks.
Ah, but will it be a spike — or is this the New Normal breaking through?
According to Citigroup’s Neela Gollapudi,
Eurozone banks sip at ECB’s dollar swap facility
Rumours of an interbank funding squeeze swirled through the market last week.
Barclays Capital analysts for example noted that demand for USD funding in Europe had spiked in recent days:
The activation of fresh ECB,
How bad in Europe? Your cut-and-paste guide
Courtesy of the fixed income team at Deutsche Bank and drawn up before overnight events.
It’s a handy table of Lehman-Greece parallels, or, financial system stress measures now versus the fourth-quarter of 2008 — after Lehman Brothers collapsed.
Lehman-Greece parallels du jour (II)
Whisper it softly — but something is afoot in money markets.
The below charts, showing US dollar, sterling and euro Libor rates, via Marc Ostwald at Monument Securities, show an ineluctable trend upwards in recent weeks.
Around the world in three Libor rates
Here’s a whole heap of Libor fixings for you.
To begin with, the 3-month euro London Interbank Offered Rate, or the cost for banks to borrow money over three months in the eurozone currency, which fell to a record low of 0.58 per cent on Tuesday:
Libor-gazing, counterparty-casing
Does anyone remember Libor?
The London Interbank Offered Rate, the reported cost of borrowing between banks, has fallen by the wayside a bit since it shot to infamy — and a record high — in October 2008,
Innovating on GBP liquidity requirements
With the UK possibly standing on shaky ground when it comes to its Moody’s-imposed AAA sovereign rating, it’s to be expected that some UK gilt holders could be getting jittery.
A reasonable alternative
Not the ‘mother of all carry trades’?
FT Alphaville noted on Thursday how the USD three-month Libor rate had, for the first time since August 2009, moved back above the three-month JPY Libor rate.
It’s worth reminding at this stage what Dr.
Prepare for a junk-bond deluge in shipping
Central bank policy may have successfully pushed down Libor rates following the Lehman blow-out, but banks still appear rather reluctant to pass on those lowered costs to commercial and retail clients.
Do you want to set Libor?
The deadline for snaring a place on the BBA’s daily LIBOR-setting panel is approaching.
To enter you must be able to prove that:
a) you are a bank
b) you are already active in the interbank market
c) you haven’t confused yourself (and are,
The new carry currency?
The question’s being asked after the 3-month US dollar LIBOR rate fell to a record low of 0.299 per cent, leaving it some way below the Yen and the Swiss franc.
Libor is useless
Much has been made of Libor’s recent descent to post-Lehman crisis lows. But while some say it marks the return of a healthy interbank lending market, others — rising in number by the way– appear to see it as evidence of Libor’s growing irrelevance.
Fall in Libor clouds true picture
The dramatic fall in money market rates since last October’s peak has fuelled hopes that the credit crisis is easing. But analysts and bankers warn that the drop in Libor rates, which should boost lending in the financial markets,
Money market rates rise again
Key money market rates rose for the first time in more than two months amid worries that the economic revival could stall as the financial health of banks remains fragile. The cost of borrowing dollars between banks over three months,
Twitbore
To our shame, several of us here at FT Alphaville are quite keen on Twitter. Now at least, we have a credible reason to be:
BA LIBOR: the world’s most important number now tweets daily
That’s right,
A squeeze defreeze
Krrrrr, Krr, Krr, Krr-chunk… and splosh. Or, the crumbling sound of thawing ice as it detaches itself from the Arctic shelf.
That, at least, is the best way we can describe the sound coming from the Bloomberg machine’s Libor-OIS spread page:
“The Lehman Brothers bankruptcy is fading into history”
Bloomberg appears to be a paid-up member of the green shoots brigade, if recent stories are any indication. On Monday, the newswire ran a piece trumpeting bond traders’ belief that the memory of Lehman’s collapse was no longer cause for angst:
Libor revisited
It’s been a while since anyone really paid much attention to Libor.
Back in September, when Lehman failed, the daily Libor numbers from the BBA were anticipated with a rather grim hawkishness. Now though,