“We've seen quite a bit of upward pressure in the past couple of weeks and the fact that the TAF came in at over 50 basis points above yesterday's one-month Libor will no doubt add to that. It's a bit of a lottery as to where Libor will set.” -Barry Moran, money-market trader
Libor spikes again. Bloomberg chart here
Money-Market Rate Climbs as Bank Funding Constraints Worsen: “The cost of borrowing in dollars increased after banks paid a record premium for cash at yesterday's Federal Reserve auction, underscoring the shortage of funds available on money markets.
The one-month London interbank offered rate, or Libor, for dollars rose 22 basis points to 3.43 percent, the highest level since January, the British Bankers' Association said today. Financial institutions paid 3.75 percent at the 28-day Fed term auction facility, or TAF. That's 57 basis points more than yesterday's one-month rate, the widest spread since the TAF program began in December.
Demand for central bank loans backed by collateral surged this week as financial institutions hoard cash and balk at lending to each other on concern more banks will fail. Libor loans aren't secured and typically command rates above those of secured loans of similar maturities.
Demand for euros at today's European Central Bank auction of three-month loans was the strongest on record. The ECB allotted 50 billion euros ($73.3 billion) at a marginal rate of 4.98 percent. That's the highest since 2000. Banks bid for 155 billion euros.
As borrowing seized up last week following the collapse of Lehman Brothers Holdings Inc. and the U.S. government's takeover of insurer American International Group Inc., the overnight rate for dollars doubled to 6.44 percent, on Sept. 16.
The cost of borrowing in euros for one month rose today to the highest level since December, according to the European Banking Federation. The euro interbank offered rate, or Euribor, climbed 6 basis points to 4.91 percent. The one-week rate climbed 4 basis points to 4.74 percent, the highest level since May 2001.”
On Monday, September 15th in the post Losing Control? Fed Funds Climb to 6%, I wrote:
“Why equities aren’t in a death spiral is beyond me. My guess is they will be soon enough…”
Sure enough, equities did go into a swan dive…
On Tuesday, September 16th in the post Fed Definitely Losing Control. Fed Funds Hits 6%, I wrote:
“The markets now face the very real possibility of a disorderly liquidation. (That’s just a fancy way of saying MELTDOWN.)”
This is what has Paulson and Bernanke so spooked. This is why they’re so eager to pump $700 billion into the market. This is why they’re desperately trying to gain control of the entire financial system in the greatest power grab in history.
I last mentioned LIBOR in LIBOR Perks Up Again…
I also mentioned the TED Spread then in TED Spread, Sneaking Back Up.
Since then, LIBOR has become completely unhinged.
Like I said on April 14th in The TED Spread, LIBOR and EURIBOR = Scary Bad:
“Aberration? Nah. Not bloody likely. This is probably foreshadowing the great fun Bears are likely to have in the very near future at the expense of the Bulls…
The BEST idea the Powers That Be are shopping around is another great debt circle jerk. They’re seriously considering having the US Treasury, which is already running a massive deficit that requires in excess of $2 billion dollars from abroad daily to finance government expenditures, sell MORE debt. The brilliant plan is then to park that debt with the Fed, so the Fed can swap it out for GARBAGE. Brilliant. Wicked brilliant.”
I was having so much fun as a Bear, they had to change the rules. (Bears are NOT allowed to out-fun the Bulltards. I'm pretty sure this one of the Ten Commandments.)
“You are having waaay too much fun. No more short selling for you. Time out for you. Go sit on the thinking chair.” -Christopher Cox, Chairman of the SEC (Stupid Equity Clowns)*
Libor spikes again. Bloomberg chart here
Money-Market Rate Climbs as Bank Funding Constraints Worsen: “The cost of borrowing in dollars increased after banks paid a record premium for cash at yesterday's Federal Reserve auction, underscoring the shortage of funds available on money markets.
The one-month London interbank offered rate, or Libor, for dollars rose 22 basis points to 3.43 percent, the highest level since January, the British Bankers' Association said today. Financial institutions paid 3.75 percent at the 28-day Fed term auction facility, or TAF. That's 57 basis points more than yesterday's one-month rate, the widest spread since the TAF program began in December.
Demand for central bank loans backed by collateral surged this week as financial institutions hoard cash and balk at lending to each other on concern more banks will fail. Libor loans aren't secured and typically command rates above those of secured loans of similar maturities.
Demand for euros at today's European Central Bank auction of three-month loans was the strongest on record. The ECB allotted 50 billion euros ($73.3 billion) at a marginal rate of 4.98 percent. That's the highest since 2000. Banks bid for 155 billion euros.
As borrowing seized up last week following the collapse of Lehman Brothers Holdings Inc. and the U.S. government's takeover of insurer American International Group Inc., the overnight rate for dollars doubled to 6.44 percent, on Sept. 16.
The cost of borrowing in euros for one month rose today to the highest level since December, according to the European Banking Federation. The euro interbank offered rate, or Euribor, climbed 6 basis points to 4.91 percent. The one-week rate climbed 4 basis points to 4.74 percent, the highest level since May 2001.”
On Monday, September 15th in the post Losing Control? Fed Funds Climb to 6%, I wrote:
“Why equities aren’t in a death spiral is beyond me. My guess is they will be soon enough…”
Sure enough, equities did go into a swan dive…
On Tuesday, September 16th in the post Fed Definitely Losing Control. Fed Funds Hits 6%, I wrote:
“The markets now face the very real possibility of a disorderly liquidation. (That’s just a fancy way of saying MELTDOWN.)”
This is what has Paulson and Bernanke so spooked. This is why they’re so eager to pump $700 billion into the market. This is why they’re desperately trying to gain control of the entire financial system in the greatest power grab in history.
I last mentioned LIBOR in LIBOR Perks Up Again…
I also mentioned the TED Spread then in TED Spread, Sneaking Back Up.
Since then, LIBOR has become completely unhinged.
Like I said on April 14th in The TED Spread, LIBOR and EURIBOR = Scary Bad:
“Aberration? Nah. Not bloody likely. This is probably foreshadowing the great fun Bears are likely to have in the very near future at the expense of the Bulls…
The BEST idea the Powers That Be are shopping around is another great debt circle jerk. They’re seriously considering having the US Treasury, which is already running a massive deficit that requires in excess of $2 billion dollars from abroad daily to finance government expenditures, sell MORE debt. The brilliant plan is then to park that debt with the Fed, so the Fed can swap it out for GARBAGE. Brilliant. Wicked brilliant.”
I was having so much fun as a Bear, they had to change the rules. (Bears are NOT allowed to out-fun the Bulltards. I'm pretty sure this one of the Ten Commandments.)
“You are having waaay too much fun. No more short selling for you. Time out for you. Go sit on the thinking chair.” -Christopher Cox, Chairman of the SEC (Stupid Equity Clowns)*
*Not an actual quote. But this is what I heard (in my head) when the short selling ban was put into effect.
Posts
9 comments:
Why dont they take that 700 billion and form a new bank, one with strict financial oversight, that can make the safe loans that all these bad banks are not making?
Im talking about the money that needs to be lent in order for small and large businesses to operate, and for people with good credit to buy homes and cars.
Then they could let the bad banks fail, and the new bank could buy up any remaining good assets at discount.
Doug,
That would make waaay too much sense and be waaay to practical and ACTUALLY solve the problem.
It would even be efficient.
But it wouldn't give random politicians any power at all and no money to play with.
So it's clearly an idea that would never be considered.
Why not buy wachovia or wamu and use it as the foundation of the nationalize champion with a five year term with option for another 5 years fbefore privatization. This way you get all the systems and infrastructure. Then just use it to swallow deposits.
My impression is that we can easily deal with banks (shown by numerous crises, including Sweden and not so successful in Japan) such as wachovia, Wamu... But how do you deal with all these investments "banks" that dramatically exceeded the 12-to-1 leverage rules.
Why doesn't FASB (and SEC) force firms to inform investors what'son their book?
Ben, does that mean you're not heavily short any more? Expect a bounce first? Sounds like this thing's going through one way or another, is it enough to keep the fit from hitting the shan in the short term?
Jonny,
Still short... just a little less. Taking some profits from the 'disgusting super spike'.
I'm ALWAYS net short something.
We aren't even in a recession yet. I don't care how high we bounce, I can afford to hold.
We are going to deflate like you wouldn't believe...
Patience.
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