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Ecb Overnight Lending Spike

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http://www.irishtimes.com/newspaper/breaking/2011/0217/breaking59.html

Emergency overnight borrowing from the European Central Bank jumped to a near two-year high, leaving money market traders wondering whether a bank was in trouble or if the spike was down to a simple data input error.

ECB figures showed banks borrowed more than €15 billion in high-cost emergency overnight funding. It is the highest amount since June 2009, compares with the €1.2 billion borrowed the previous night and comes just a day after banks received their regular injection of weekly ECB funding.

Overnight borrowing from the ECB is usually well below €1 billion.

The figures sent jitters through interbank lending markets as dealers tried to determine whether a bank was facing serious funding problems or if it was just a short-term issue.

The extra 0.75 per cent banks have to pay for overnight funding normally means it is used only as a last resort.

"If it was a one-day mistake, it will disappear tomorrow, but if it stays then you start worrying," one euro zone money market trader said.

The ECB, the Bundesbank and a string of other euro zone central banks and commercial banks declined to comment.

Other traders said there was no sign of any bank desperately searching for funding late yesterday, suggesting it may be that a bank simply made a data input error.

Market observers will be watching closely when the ECB's figures are updated around 0810 GMT tomorrow. If the level of borrowing remains equally elevated worries are likely to grow and could spark a renewal of tensions in money markets.

Would this be a costly data input error? Would the banks senior directors be happy for such a data entry error to occur? Has this sort of thing happened in the past where it's been a "data input error"?

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and comes just a day after banks received their regular injection of weekly ECB funding

Something about that bugs me. I think it's because they act as if they are experts, nobley trying to keep a great worthy thing alive, rather than just playing around with imaginary numbers; more like an addict getting the weekly methadone.

Of course the figures will be whatever they want it to be in the morning.

Edited by chronyx

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Something about that bugs me. I think it's because they act as if they are experts, nobley trying to keep a great worthy thing alive, rather than just playing around with imaginary numbers; more like an addict getting the weekly methadone.

Of course the figures will be whatever they want it to be in the morning.

Don't they have the option of lending in secret?

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Don't they have the option of lending in secret?

Why bother? Ultimately it doesn't make any difference either way!

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Why bother? Ultimately it doesn't make any difference either way!

Of course it matters, everyone can carry on pretending everything is fine. We can't extend and pretend if everyone admits the truth, that's not the way of the matrix.

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Of course it matters, everyone can carry on pretending everything is fine. We can't extend and pretend if everyone admits the truth, that's not the way of the matrix.

Take the 'green' pill

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ECB figures showed banks borrowed more than €15 billion in high-cost emergency overnight funding. It is the highest amount since June 2009, compares with the €1.2 billion borrowed the previous night and comes just a day after banks received their regular injection of weekly ECB funding.

Overnight borrowing from the ECB is usually well below €1 billion.

So the usual level is <1B, Tue night was 1.2B.

So if Wed night was 1.5B, people might get a bit nervous, because the need for emergency liquidity is rising fast. But say the figures report 15B for Thur night, so everyone holds their breath, and then on Fri it is reported that overnight borrowing was (say) 1.3B.

If that is what happens, will people really think "ahh, it was just a fat finger", and ignore the 20 - 30% increase in the short term funding gap? Or will they think "hang on a minute, is this a weekend rescue they are setting up here"?

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http://www.irishtimes.com/newspaper/breaking/2011/0217/breaking59.html

Would this be a costly data input error? Would the banks senior directors be happy for such a data entry error to occur? Has this sort of thing happened in the past where it's been a "data input error"?

I wish I could get my 'regular injection of weekly funding' instead of 'working'.

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So the usual level is <1B, Tue night was 1.2B.

So if Wed night was 1.5B, people might get a bit nervous, because the need for emergency liquidity is rising fast. But say the figures report 15B for Thur night, so everyone holds their breath, and then on Fri it is reported that overnight borrowing was (say) 1.3B.

If that is what happens, will people really think "ahh, it was just a fat finger", and ignore the 20 - 30% increase in the short term funding gap? Or will they think "hang on a minute, is this a weekend rescue they are setting up here"?

Is a major European bank having a Nick Leeson moment a la Soc Gen?

No links, no rumours, just speculation........

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http://www.ukipmeps.org/blog_view_3160_Surge-In-ECB-Emergency-Overnight-Borrowing-Spooks-Euro.html

The WSJ provides some perspectives for the surge:

"The ECB declined to give any explanation for the high figure, which generally reflects acute, if mostly short-lived, liquidity problems at one or more banks.

"Use of the facility had been minimal at the start of the year, but had risen to around a daily average of over €700 million in the past week.

"The rise in the use of marginal lending by the ECB is all the more surprising as there were no generalized signs of stress in the money market Wednesday. The benchmark overnight rate for euros, Eonia, eased to 0.7% from 0.749% on Tuesday, its lowest fixing in more than a week."

According to some traders the spike has to do with a technical error, or the failure of a bank to request enough cash during normal liquidity providing operation, but a €15 billion oversight is just too big.

Perhaps one should look at the fresh all time record Portuguese 10 year bond yield for clues why this has happened. Should the MLF lending spike tomorrow as well, someone will have to answer questions.

Interesting.

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Perhaps one should look at the fresh all time record Portuguese 10 year bond yield for clues why this has happened. Should the MLF lending spike tomorrow as well, someone will have to answer questions.

Interesting.

Indeed.

European clearing imposes a maximum threshold on the spread to the bund of +4.50. Portuguese 10 year is getting periously close at +4.28. If this is breached, then Portugal could join Ireland and become the third domino.

Nerves are getting frayed again.

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that's not the way of the matrix.

Look you've been warned about this before. You're not allowed to talk about the Matrix.

If you mention it again were going to have you unplugged.

This is your last chance.

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http://www.forexlive.com/167852/all/overnight-borrowing-from-ecb-remains-highly-elevated

Can't find the figures for now but the levels still high

Edit

Reuters: Emergency overnight borrowing from the European Central Bank remained exceptionally elevated on Friday, strengthening fears that a euro zone bank could be facing serious funding problems.

It is the highest amount since June 2009, and compares with the 1.2 billion euros borrowed before the figures spiked on Thursday. The ECB gives no breakdown of the borrowing figures.

The central bank reported the following daily data on liquidity provision, in millions of euros

Edited by didntbuytolet

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http://www.forexlive.com/167852/all/overnight-borrowing-from-ecb-remains-highly-elevated

Can't find the figures for now but the levels still high

Edit

Reuters: Emergency overnight borrowing from the European Central Bank remained exceptionally elevated on Friday, strengthening fears that a euro zone bank could be facing serious funding problems.

It is the highest amount since June 2009, and compares with the 1.2 billion euros borrowed before the figures spiked on Thursday. The ECB gives no breakdown of the borrowing figures.

The central bank reported the following daily data on liquidity provision, in millions of euros

Oh dear. Shall we have a sweepstake on which bank it is. My money is on Bank of Ireland. Literally. :(

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http://www.zerohedge.com/article/acute-liquidity-crisis-europe-confirmed-borrowing-surge-marginal-lending-facility-continues-

The one thing that nobody is conveniently talking about that has suddenly become a big flash red light, the surge in borrowing on the ECB's Marginal Lending Facility which we noted yesterday, continues for the second day in a row, removing all speculation of this being a technical or calendar glitch, and confirming that some financial entity in Europe has entered its death rattle. Today, the ECB announced that after borrowing €15.8 billion in overnight liquidity, the highest since the program's inception in 2009, we got another increase in borrowing, this time at €16 billion in overnight liquidity needs. With expectations that this borrowing surge at a last resort rate of 1.25% would normalize disappearing, we are surprised the reaction in the EUR is not far greater: the EURUSD did contract modestly overnight, but if this is indeed the proverbial first domino we would be very concerned about the long term prospects of the European currency. What is most concerning is that after revelations of check kiting at Irish banks yesterday, which confirms that banks are using a legalized ponzi scheme to literally print each other money, that some bank - any bank - will need to resort to such a high rate source of overnight capital. As European collateral has no quality thresholds, and as the ECB will accept anything, it makes no sense for any bank to pay incremental interest just to transfer borrowing to an overnight facility with a punitive rate - simple as that. If this continues for a third day on Monday, it may well be time to follow Hugh Hendry's advice, and panic.

It would certainly appear that someone is in trouble or the same fat finger banker is still at the keyboard.

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http://ftalphaville.ft.com/blog/2011/02/18/492341/clues-to-the-eurozones-e15-8bn-fat-finger/

Bank of America Merrill Lynch rates analysts Ralf Preusser and Max Leung suggested on Thursday that if the jump was caused by a fat finger (literally, someone at a eurozone bank typing in €1.75bn instead of €17.5bn at the ECB’s Main Refinancing Operations [MRO] earlier this week) then we would see around €15bn borrowed again last night and repeated until the next ECB MRO on February 22.

Meanwhile, Barclays Capital’s Laurent Fransolet writes on Friday that:

Borrowing at the Marginal Lending Facilities remained elevated (+€16bn) as we expected. In our view, it will remain at around this level until next Tuesday or Wednesday, when it is either rolled back into MRO/3m LTRO (which would then suggest a mistake) or disappears (which would then suggest a move of the borrowing to [Emergency Liquidity Assistance] ELA. We guess first indication will come from the Autonomous Factors forecast from the ECB on Monday afternoon (indeed, an increase in ELA implies a decline in autonomous factors, as we explain in our piece “ECB: Liquidity, ELA and addicted banks”).

So either way, all will be revealed by Wednesday next week.

In the meantime though, we’ve heard a related theory going around the analyst community — one that has to do with those squirrely Irish banks and the ELA.

The €15.8bn spike might be down to an Irish bank moving most of its so-called OMO borrowings — that’s borrowing from the ECB’s open market operations — to the ECB’s marginal lending facility in preparation for the stuff being moved to non-ECB open market operations borrowing in a few days. In other words, the ELA.

Why would banks choose to do it in that way?

Using the ECB’s marginal lending facility instead of the MRO (which, it’s worth noting, did decline unexpectedly this week) doesn’t change the eurozone liquidity surplus and things like Eonia at all, we hear, but works as a way to flag that something might be moving. If there are shifts between using ECB liquidity like MROs and Long-Term Refinancing Operations (LTROs) to the ELA, and these are not flagged, then the liquidity surplus and money markets would probably have been impacted.

Get it? It could be a quiet move to non-ECB, or ELA, borrowings for Ireland’s bank(s). Who knows why, though we’d add the move could prove prudent should the ECB ever decide to move from full allotment at its LTROS to more limited funding.

From FT alpha.

Do the figures add up to the Irish being responsible for this?

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  • 284 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
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      • up 5%



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