Nothing but swap rate cut stuff. A shorter evening post coming in a minute.- MoreLiver
EURO SWAP RATE
Euro Basis Swap – TF Market Advisors
Will any of this come at a cost? Will there be renewed pressure for banks to forgive sovereign debt? With public opinion so heavily against banks, does all of this help for banks really still come without a cost to them? Politically there is a lot of support to make banks take some pain.The central bank deal: Five things to know – Wonkblog / WP
1) swaps to increase liquidity 2) the big countries are coordinating 3) a more permanent swap set-up 4) the markets are excited; the analysts are skeptically supportive 5) all eyes on European Central Bank.
1) swaps to increase liquidity 2) the big countries are coordinating 3) a more permanent swap set-up 4) the markets are excited; the analysts are skeptically supportive 5) all eyes on European Central Bank.
Central banks, what are they good for? Mainly, it seems, for generating volatility.
Flash: Global central banks move to ease dollar liquidity – Danske Bank (pdf)
Market participants will clearly be waiting to see whether more will be announced or whether this is a one-off from global central banks. However, note the strong positive reaction in global equity markets, emerging markets and commodities. Expectations are clearly building that more monetary easing is coming.
Is It Enough? – The View from the Blue Ridge
The conclusion appears obvious if you are able to step away from the day-to-day noise, rumors, plans, and announcements. This will take some time to fully play out. Until it does, we’d recommend reducing exposure to risk assets on policy-induced rallies. We have not yet learned the most obvious lesson of this ongoing financial crisis. You cannot solve a solvency problem with liquidity.
Maximum intervention moves into overdrive – Saxo Bank
Right now, foreign banks can fund themselves cheaper in US Dollars than US banks. This will almost certainly mean the discount rate will be cut by 25 bps and before the weekend.
Central Banks Provide Hope, But Not the Cure – The Source / WSJ
No one is fooled that this pulls the euro project back from the brink. The reckoning now is that Europe has until its critical summit on Dec. 9 to craft a convincing plan before investors cut their losses and run.
No one is fooled that this pulls the euro project back from the brink. The reckoning now is that Europe has until its critical summit on Dec. 9 to craft a convincing plan before investors cut their losses and run.
Was the Fed Swap-Line Decision Leaked on Monday? – WSJ
Decision was made on Monday, stocks rallied hard with no apparent reason.
Central banks augment currency swap capabilities – Econbrowser
If the Fed decides to open a new Term Auction Facility, this time for extending euro-denominated loans to U.S. banks, it will once again find itself needing to distinguish between the problems of solvency and liquidity. No action by a central bank can solve the problem of a debt that's not going to be repaid.
JPM Explains The Novel Feature In Today's Fed Liquidity Swap Line Expansion – ZH
The new foreign liquidity swaps, whereby the Fed can offer euros, yen, loonies, pounds or swiss francs to US banks, is a novel step and a curious feature of today's announcement. The Fed's official statement is that these are being implemented as a "contingency measure." There are no plans to make these operational in the near term, but are apparently being set up as a backup plan in the event of a worsening in global financial conditions.
The new foreign liquidity swaps, whereby the Fed can offer euros, yen, loonies, pounds or swiss francs to US banks, is a novel step and a curious feature of today's announcement. The Fed's official statement is that these are being implemented as a "contingency measure." There are no plans to make these operational in the near term, but are apparently being set up as a backup plan in the event of a worsening in global financial conditions.
Foreign Currency Liquidity Swaps (aka Global Bail Out Plan B) FAQs – ZH
includes a scribd-primer by the Federal Reserve.
includes a scribd-primer by the Federal Reserve.
The Central banks act: Battening down the hatches – Free exchange / The Economist
That leaders around the world are behaving with an increasing recognition of the severity of the situation is a good sign. For now, however, the most significant near-term threat to the global economy—the problems of debt and contagion in the euro zone—continues to grow.
Central Banks Take Coordinated Action – WSJ
"The European debt problem can't be solved by liquidity provisions alone," Bank of Japan Gov. Masaaki Shirakawa said at a hastily arranged news conference. "The step is meant to buy time for European countries to proceed with their fiscal and economic reform."
"The European debt problem can't be solved by liquidity provisions alone," Bank of Japan Gov. Masaaki Shirakawa said at a hastily arranged news conference. "The step is meant to buy time for European countries to proceed with their fiscal and economic reform."
Euro Basis Swap Perspectives – Peter Tchir / ZH
In the end, does it change the need to shed assets? No. Does it print money? No. Does it virtually ensure an ECB rate cut? Yes.
Guest post: El-Erian on central bank action – alphaville / FT
The hope is that central banks are acting because, looking forward, they feel confident that other policymakers will finally catch up with a big and spreading debt crisis… The fear is that they are acting because they feel that they must again pre-empt yet another set of potential disappointments.
The hope is that central banks are acting because, looking forward, they feel confident that other policymakers will finally catch up with a big and spreading debt crisis… The fear is that they are acting because they feel that they must again pre-empt yet another set of potential disappointments.
More on the dollar crunch and the liquidity drop – alphaville / FT
RBC: it is now cheaper for foreign banks to borrow dollars from their central bank than it is for a US bank to borrow from the Federal Reserve, RBS: this is just a backstop and doesn’t fundamentally change the bigger picture, Nomura: this global CB coordination is a sign that folks in the right places are “getting it.”
RBC: it is now cheaper for foreign banks to borrow dollars from their central bank than it is for a US bank to borrow from the Federal Reserve, RBS: this is just a backstop and doesn’t fundamentally change the bigger picture, Nomura: this global CB coordination is a sign that folks in the right places are “getting it.”
Did The Fed Just Buy Europe A Week? – ZH
today's reaction - a 22bps jump (in EURUSD cross-currency basis swap) - while being large, merely moves us back to the same levels of stress we were at one week ago. So even if this is seen as some huge form of liquidity surge, it seems not to have even solved the liquidity problems of banks, let alone solvency problems.
today's reaction - a 22bps jump (in EURUSD cross-currency basis swap) - while being large, merely moves us back to the same levels of stress we were at one week ago. So even if this is seen as some huge form of liquidity surge, it seems not to have even solved the liquidity problems of banks, let alone solvency problems.
Here Is What Happened After The Last Global Coordinated Central Bank Intervention – ZH
Another attack on liquidity, not solvency – The Big Picture
The collateral limits of coordinated action – alphaville / FT
RBS: the move has the right flavour as a symbolic gesture. Central banks can step in and solve liquidity problems and slow or even reverse the rise in LIBOR rates…FT: Without altering the underlying collateral shortage the move will only be a welcome but temporary reprieve. Everything still depends on the EU and the ECB.
Central Banks Announce Coordinated Liquidity Effort to Alleviate Euromess – naked capitalism
I’m not certain this changes things as much as markets assume. The ECB is ultimately responsible for creating euros. I’m not certain how much of a policy stance this move represents. If the ECB is committed to “printing”, then why the need to turn to other central banks for a coordinated effort?
ECB Coordinated Policy Action Is ‘Big Deal’ — From September 15th – TF Market Advisors
On September 9th, SPX closed at 1154. On the morning of the 15th the “unprecedented” global co-ordination was put in place. SPX went to 1210 that day, closed at 1216 the next and was at 1130 by September 22nd.
Central Banks Announce Coordinated Liquidity Effort to Alleviate Euromess – naked capitalism
I’m not certain this changes things as much as markets assume. The ECB is ultimately responsible for creating euros. I’m not certain how much of a policy stance this move represents. If the ECB is committed to “printing”, then why the need to turn to other central banks for a coordinated effort?
Did The Fed Leak The European Bailout Decision On Monday Morning? A Visual Exhibit – ZH
Its clear at least from the chart that regimes shifted dramatically on Monday and we also noted that European equities were so dramatically disconnected from credit that evidently someone was 'guessing' really well with a large amount of flow.
Its clear at least from the chart that regimes shifted dramatically on Monday and we also noted that European equities were so dramatically disconnected from credit that evidently someone was 'guessing' really well with a large amount of flow.
Global central banks send in the USD liquidity cavalry – Saxo Bank
This was clearly in response to the emergency liquidity pressures on European banks, where the symptoms of the strain were evident lately as the Euro basis swaps heading as low as -162 bps today – by far the lowest since the global financial crisis, when they never closed a week of trading below -150 bps (though they were lower at times intra-week).
Central Bank Swap-Line Rate Cut: What It Means – MarketBeat / WSJ
The major help to risk assets is that those investors no longer will need to see LIBOR rise relentlessly (and it should make year-end a little less messy), but we don’t think this is a real game-changer.
The ‘dollars for euro collateral’ crunch – alphaville / FT
Whatever the case, the June 2010 dollar repo boom potentially gives us an indication of the size of the US dollar funding deficit in Europe — a number that’s far too close to $1,000bn for comfort.
From my today's earlier post, repeated for your convenience:
Whatever the case, the June 2010 dollar repo boom potentially gives us an indication of the size of the US dollar funding deficit in Europe — a number that’s far too close to $1,000bn for comfort.
From my today's earlier post, repeated for your convenience:
Central banks move to ease European dollar crunch – alphaville / FT
The question is, did German bonds start yielding less than zero because of a sudden dollar liquidity crunch in the market? And to what degree is this connected to margin calls on depreciating euro-denominated collateral pledged in return for dollar funding?
The question is, did German bonds start yielding less than zero because of a sudden dollar liquidity crunch in the market? And to what degree is this connected to margin calls on depreciating euro-denominated collateral pledged in return for dollar funding?
Coordinated central bank action to address pressures in global money markets – ECB
Press release. Seems some central banks have additional material and links on their web pages.
I posted this and a few minutes later the Fed/other CBs announces a round of coordinated measures to assist the ECB. My point in this article was that the ECB has no friends, and that was the weakest link in their defense of the EU bond market. It seems they now have friends. We shall see how good these "friends" are.
Central banks lower swap rates by 50 basis points – Saxo Bank
Combined with this week's failure by the ECB to completely sterilize its purchases of stricken peripheral bonds, this will increase speculation that the next official step may be for the ECB to bow to pressure to become the lender of last resort to Eurozone states; risk-on for now.
Added on 1-Dec
Added on 1-Dec
Central Banks’ Latest Move Shows Desperation – The Big Picture
Roundup of comments on swap rate cut
Swap lines – not a panacea – Pragmatic Capitalism
The program has been in place since 2007 so the announcement is just an alternative form of something that was already in place.
Goldman On Today's Coordinated Central Bank Bailout: "It Isn’t Enough To Save Anyone Or Solve Everything" And "Why Now?" – ZH
The difference between OIS + 50 and OIS + 100 isn’t enough to save anyone or solve everything. It’s the symbolism of policy-makers again acting in concert that I find most encouraging. Why act now – is there something lurking around the corner? GS also cut europe’s GDP forecast from +0.1 to -0.8%.
The difference between OIS + 50 and OIS + 100 isn’t enough to save anyone or solve everything. It’s the symbolism of policy-makers again acting in concert that I find most encouraging. Why act now – is there something lurking around the corner? GS also cut europe’s GDP forecast from +0.1 to -0.8%.
It’s The Thought That Counts – TF Market Advisors
I expect ECB rate cut and promises of treaty agreements. I am far less convinced that ECB will print in which case this rally has gotten far ahead of itself because this is not enough to stop banks from continuing to reduce their balance sheets.
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The move came once it was clear that Europe's prostrate banks would struggle to roll over $2 trillion (£1.3 trillion) of debts denominated in dollars. Data from ratings agency Fitch shows that US money markets have slashed funding for French banks by 69pc and German banks by 50pc.
Does Anybody Who Gets It Believe Central Banks Did All That Much Yesterday? – naked capitalism
Since we seem to have an international policy of “bondholders take no losses until the situation becomes completely untenable,” I don’t see a sensible resolution in the offing. The European leadership has lurched from stopgap to stopgap to avoid taking tough action. Now that the crisis is upon them, badly ingrained habits and tight timetables argue against happy outcomes.
Global central banks take action to prevent EU credit crunch – euobserver.com
The situation became grave after the meeting of eurozone finance ministers on Tuesday when they admitted that they would be unable to leverage the region's bail-out fund anywhere near the level that had been hoped. Without such a rescue, in effect mainly from the US Federal Reserve, the European banking system could have lurched to a halt.
Barclays: Market Reaction To Fed-Action "Exaggerated" – ZH
The coordinated rate cut addresses the liquidity shortfall in the European banking system, but it does not address the causes of the slow-motion bank run – only reduces the cost of official substitute liquidity by 50bp.
The coordinated rate cut addresses the liquidity shortfall in the European banking system, but it does not address the causes of the slow-motion bank run – only reduces the cost of official substitute liquidity by 50bp.
Poor Performances Following Central Bank Liquidity Injections – HistorySquared
A recent post showed the returns to risk assets following recent central bank interventions has been negative. DailyCapitalist looked a little further back, highlighting failed examples from 2007-2008. The below charts put the announcements into context.