Friday, May 07, 2010

European Liquidity Issues

by Bill McBride on 5/07/2010 01:29:00 PM

There is a rumor circulating that the ECB is prepared to announce a €600 billion loan facility for European banks over the next few days. One key analyst has suggested that the FOMC might re-open the dollar swap lines for Europe. Update: I don't usually post rumors during the day, but this is being widely circulated as a possibility.

Note that the Bank of Japan moved last night, from the Financial Times: Bank of Japan pumps funds into market

The Bank of Japan offered Y2,000bn ($21.6bn) in overnight liquidity on Friday to “increase markets’ sense of security” because of turmoil resulting from the debt crisis in Greece. ... the bank’s action reflects global demand for dollar liquidity as investors move out of the euro.
excerpt with permission
And from the WSJ: European Banks Head Toward New Funding Crunch
Europe's sovereign debt crisis is making it harder for European banks to get their hands on dollars and may require their central banks to step in with short-term liquidity ...
The Libor rate has increased, but it is still at a very low level. This could be something to watch.

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