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Boe Blinked Again. Kind Of.

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http://www.abcmoney.co.uk/news/052007129287.htm

Wed, 05 Sep 2007 12:42

LONDON (Thomson Financial) - The cost for banks to borrow money amongst themselves over a three-month period continued to rise, as an intervention today by the Bank of England to alleviate immediate liquidity problems did not address the wider credit crisis in the financial sector.

The London interbank offered rate (Libor) fixing for three-month sterling deposits inched up to 6.80 pct today from 6.7975 pct yesterday, the highest level since November 1998. This rate is 105 basis points above the 5.75 pct bank rate, the biggest spread in 20 years.

At the same time, the overnight Libor rate fell, to 5.90 pct from 6.11 pct yesterday, after the Bank of England stepped in today to make overnight lending among banks and from the BoE cheaper.

But while the BoE's action was aimed to improve overnight liquidity, it said it was not within its scope to manage the longer-dated lending rates.

The BoE today announced the aggregate reserves rose by 6 pct for the coming one-month period and that it would increase the amount of funds available at its bank rate of 5.75 pct if money market rates continued to stay high.

It pointed out that this action was intended to help the overnight liquidity problems, and not to affect the credit crisis in the longer-dated maturities -- such as the three-month rate.

'Those (longer-dated) spreads have risen significantly in all major financial markets since Aug 9, reflecting the difficulty of valuing a variety of asset-backed instruments which, for the moment, has reduced liquidity,' said the BoE in a statement today.

'The sources of these problems does not, therefore, lie in a lack of central bank liquidity,' it concluded.

Analysts believe that the rates beyond the overnight will not ease as long as the BoE and other central banks target only the immediate liquidity problem and not the broader credit crisis.

'It seems likely that these rates will remain elevated until wider concerns over the US subprime crisis and associated credit issues start to ease,' said Jonathan Loynes.

'We expect that to happen gradually over the coming weeks, but the longer they remain at current levels, the greater the potential effect on the economy and monetary policy,' said Loynes.

Assume the crash position! We're going down!

Edited by AvidFan

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Guest grumpy-old-man
No rate rises for a while me thinks!

it won't really matter now anyway will it?

people are fooked on 5.75%, then wait til the resets kick in Sept/Oct in the UK.....oh & the current stock market problems of course :o:lol:

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This is pretty tough stuff from the BoE, though, isn't it?

"We'll sort out overnight lending. The rest is your problem."

Cash-under-mattress moment comes a little bit closer ;)

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Muhahhahahahahahahahah

Muhahahahahahahhahahahahahhahahahah

It's "contained"

Muhahahahahahahahahahah

Muahhahahahahahahahahhahahaha

http://www.marketwatch.com/news/story/citi...F21BB49A3669%7D

LONDON (MarketWatch) -- Citigroup has nearly $100 billion in "structured investment vehicles," off-balance sheet investments that issue short-term commercial paper and re-invest proceeds in higher-yielding debt, according to a report in The Wall Street Journal.

Oh dear - use of coloured text. Please join Eric and RB in the nutters corner ;)

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Analysts believe that the rates beyond the overnight will not ease as long as the BoE and other central banks target only the immediate liquidity problem and not the broader credit crisis.

WTF?

How exactly is a central bank meant to "target" the fact that suddenly no bank trusts any other bank enough to lend money?

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I think I've worked out where the misunderstanding is surrounding "contained"

Think they mean contained like one of those rank thermos flasks from about 20 years ago that has been booted about a bit...you know the type...p1ss coffee all over your sarnies when you're really starving :(

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Guest grumpy-old-man
0746:43 BDIA BOE tower, BARC two seven heavy has an emergency. Lost ah number two SIV, we've taken some birds.

0746:44 BOE You're in override.

0746:45 ECAH There's the rudder.

0746:46 BDIA Got it.

0746:47 ECAH You're in override.

0746:48 BDIA Thank you.

0746:49 BOE Starting dump.

0746:51 ECB Start dumping.

0746:52 BOE BARC two seven heavy, roger. Say intentions.

0746:55 [LIBOR shaker activates, continues until impact]

0746:56 ECB BARC zero two heavy's coming back around for an emergency return.

0746:58 BDIA Lower the rate, lower the rate, lower the rate.

0747:00 BOE Two seven heavy, roger.

0747:00 BDIA Goin' down.

0747:02 BOE Oh my God.

0747:02 BDIA Oh ###.

0747:04 BOE OK, give it all you got, give it all you got.

0747:06 BDIA Two seven heavy, emergency.

0747:09 BDIA Roll the crash, roll the crash.

0747:10 [PA tone]

0747:11 BOE Crash landing

0747:11 BDIA We're goin' in.

0747:11 BDIA We're going down.

0747:12 [Crash]

so it's very bad then cgnao. :D

I assume though it will still take days/weeks for it to play out mainstream ?

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FTSE 100 has been going down all day...

DOW vertically down 175 points on opening...

Credit squeeze causing a sell off again. No moral hazard here...

Gold peaked up to 682.6 on the fall...

Edited by AvidFan

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