In case it wasn’t clear enough that the People’s Bank of China is mostly okay with the squeeze in interbank liquidity, it came out with another signal today.
To recap – last week, when the key seven-day Shibor repo rate spiked above 10 per cent, the PBoC maybe injected extra liquidity to certain banks. Or maybe, as a source of our FT colleague Simon Rabinovitch tells it, what it *actually* did was just tell the big banks to stop worrying and just start lending, dammit. Read more
Yeah, so “stupid Libor emails” is now an established sub-genre in banker literature.
Though the funny thing about Wednesday’s RBS revelations is that attempts at manipulation generally, at least at the start, weren’t written down. The whole problem was that people trading rates were sat right next to people in charge of submitting rates for Libor. That’s due to the “Short-Term Markets Desk”, RBS management’s October 2006 bid to “facilitate more communication”. Oops. Read more
Presenting the CFTC order against RBS, as part of the bank’s $325m settlement with the regulator over allegations of “hundreds” of attempts at manipulation of Libor (notably Yen Libor):
UK regulators and global banks are discussing a potentially far-reaching overhaul of the calculation and regulation of interbank lending rates, amid an ongoing probe into possible manipulation of Libor, the FT reports. People familiar with a meeting held in London on Monday said the review could encompass everything from revamping the way Libor rates are set, to imposing new regulatory oversight and compliance requirements on banks who take part in setting Libor rates.
The investigation into the possible manipulation of the Libor interbank rate goes on, with a bank telling regulators in Canada that its traders ”were able to move” the rate, reports the WSJ. The probe has shone a light on the role of voice brokers in helping to set Libor rates and the financial products that use them, the FT adds. The inquiry is examining whether groups of traders conspired with brokers to influence banks’ rate submissions for the London rate for yen, known as yen Libor, and the Tokyo interbank offered rate, or Tibor, according to regulatory disclosures and people familiar with the case.
…And whither banks?
RBS with some interesting detail on ECB bond-buying tallies so far: Read more
Where “good” = yield from a nice Eonia trade.
Quite frankly, this looks to us like picking up pennies in front of a steamroller. Read more
It confusingly shares a name with a Staines minicab operator…
And a Swedish children’s book… Read more
Three investment funds have accused banks in the US, Europe and Japan of artificially suppressing Libor between 2006 and 2009, the FT reports. FTC Capital, based in Vienna, and two FTC Futures Funds registered in Luxembourg and Gibraltar accuse 12 banks of selling derivatives based on artificial prices, in a suit filed to a New York court. Seeking damages and a class action lawsuit, the funds argue that the banks sought to conceal doubts over their financial stability, and to take advantage of insider trading in Libor-linked derivatives. Regulators are already investigating claims of Libor manipulation by banks in the crisis, FT Alphaville writes.
Eonia went a bit doolally at the end of January.
Many blamed a lack of front-loading in bank liquidity management as they watched Europe’s key overnight lending rate drift above one per cent for the first time since June 2009. Read more
***WARNING*** Interbank rate geekiness ahead! ***WARNING***
There’s been a bit of (somewhat post hoc?) concern in recent days over the cash crunch in Chinese interbank markets.
The one-week Shanghai Interbank Offered Rate went up, up… and then came down. Same stuff in the seven-day repo rate, which probably tells you more as it’s a more developed market than Shibor. That follows the Christmas Day interest rate hike, and could be the market reacting to heavier tightening ahead by the People’s Bank of China in 2011. Read more
Here on FT Alphaville, we’ve often written about the increasing trend towards backing interbank trades with quality collateral.
So far it’s come across as an ad hoc response to post-crisis credit risks, and in Europe especially, the long-term fracturing of eurozone stability into various sovereign risks. Some strange curve pricing here, curious rates divergence there. Read more
There’s some contagion control going on in Brussels on Monday following the weekend’s epic Irish bailout.
As Reuters reports: Read more
China’s one-month repo rate is nearing the 2009 highs it made back in June.
At the time the rise was attributed to the pending AgBank IPO, capital raisings by banks, and a switch from lending to higher-yielding central bank bills. Read more
Or, what keeps Britain’s central bankers up at night.
The Bank of England and the Centre for Economic Policy Research hosted their fourth monetary policy roundtable on July 14, the summary report of which has only just been published. Read more
Did stress-testing the sovereign exposures of European banks help soothe the market, asks FT Alphaville? On Monday July 26, shortly after results of the tests were published, the analysts at RBS came up with seven indicators that might suggest whether the exercise had ‘succeeded’ in terms of sentiment. They’ve now published an update and all but one of the indicators seems to point to success rather than failure. Read more
Short-term liquidity rates — like European top-tier commercial paper — quite literally jumped off a stress-test cliff last week, reports FT Alphaville. Which is rather a step-change given that for the first few days after test results were announced some European interbank strains looked to have persisted. Three-month Euribor, for instance, continued its steady ascent upwards for most of last week. It finally dropped to 0.896 on Friday — its first decline since April 30, according to Bloomberg. Read more
Spanish banks and cajas, frozen out of the international wholesale finance markets on which they once depended, increased their borrowing from the European Central Bank by nearly half to €126.3bn ($161.2bn) in June from €85.62bn in May, the FT reports, citing figures released by the Bank of Spain. Spanish borrowing from the ECB increased 48 per cent, even though the total lent by the ECB across the eurozone fell 4 per cent to €496.62bn last month from €518.63bn in May.
Alastair Gray of UBS has a pretty harsh response to the impending publication of stress tests on twenty-five EU banks.
He wants to see some failure in the mix: Read more
Well, Spain can’t blame los especuladores medios anglosajones for this one.
The Spanish newspaper Cinco Días says the country’s banks are losing access to interbank lending (translation and emphasis FT Alphaville’s): Read more
Many parallels have been drawn 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. In 2008, money market strains manifested themselves in a cash shift — spot dollar Libor-OIS spreads moved first. FT Alphaville has their analysis. Read more
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.
Time then for some reflection. Read more
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. Read more