Comments on: Money Markets Still Stressed, Conditions Expected to Worsen http://www.nakedcapitalism.com/2008/08/money-markets-still-stressed-conditions.html Mon, 23 Nov 2009 08:11:00 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Hubert http://www.nakedcapitalism.com/2008/08/money-markets-still-stressed-conditions.html#comment-13489 Hubert Mon, 25 Aug 2008 13:59:00 +0000 http://www.nakedcapitalism.com/2008/08/money-markets-still-stressed-conditions-expected-to-worsen/#comment-13489 A shot from the hip: Banks lend according to LIBOR but only part of funding relates to LIBOR. So high LIBOR rates indicate trouble in the correponding Interbank Lending market but also bring much needed earnings margins.<br/>Now considering that the BBA makes up LIBOR anyway the way they want - and we certainly have found out that by now - isn´t it possible that they, by tacitly raising the 3 month rate, blackmail Central Banks into providing more cheap liquidity through the different Windows?<br/>2 weeks ago we could see LIBOR creeping up, new liquidity promised by CB´s, LIBOR rates falling 6-8 points only to go up again in the aftermath.<br/>Maybe it is just a replay of that maneuver.<br/><br/>The banks have no longer any reputation to lose and if they put LIBOR up - what can CB´s do ?<br/><br/>Be prepared for the next December funding panic: Give us a shot of cheap liquidity or we will push LIBOR.<br/><br/>Am I too cynical here? A shot from the hip: Banks lend according to LIBOR but only part of funding relates to LIBOR. So high LIBOR rates indicate trouble in the correponding Interbank Lending market but also bring much needed earnings margins.
Now considering that the BBA makes up LIBOR anyway the way they want – and we certainly have found out that by now – isn´t it possible that they, by tacitly raising the 3 month rate, blackmail Central Banks into providing more cheap liquidity through the different Windows?
2 weeks ago we could see LIBOR creeping up, new liquidity promised by CB´s, LIBOR rates falling 6-8 points only to go up again in the aftermath.
Maybe it is just a replay of that maneuver.

The banks have no longer any reputation to lose and if they put LIBOR up – what can CB´s do ?

Be prepared for the next December funding panic: Give us a shot of cheap liquidity or we will push LIBOR.

Am I too cynical here?

]]> By: chris http://www.nakedcapitalism.com/2008/08/money-markets-still-stressed-conditions.html#comment-13487 chris Mon, 25 Aug 2008 12:21:00 +0000 http://www.nakedcapitalism.com/2008/08/money-markets-still-stressed-conditions-expected-to-worsen/#comment-13487 Does the discussion about Libor snd other rates indicate that the financial world borrowed its way out of credit difficulties last year in the hope that lower interest rates would promote the activity which could "keep things going" for another round? Does this mean that what is coming up now, and for the rest of the year, (through the anniversary of the Fed's help with year end book keeping) is that old debt, and last year's borrowings need to be repaid, and new equity or debt raised to keep things going "forward"?<br/><br/>If somewhat true, wouldn't this surely indicate that all the wisdom, virtuosity and wit celebrated in Jackson's Hole have only made "things" much, much worse. <br/><br/>Or, is something else going on which the details are pointing to, but not making transparent? <br/><br/>Debt roll-overs and pay-backs, in a timely way, do still seem to be key to the whole thing, borrow, pay interest on time, pay back what you borrowed on time, borrow more. Non-performance soon enough becomes default. The encore has to be international I guess. Does the discussion about Libor snd other rates indicate that the financial world borrowed its way out of credit difficulties last year in the hope that lower interest rates would promote the activity which could “keep things going” for another round? Does this mean that what is coming up now, and for the rest of the year, (through the anniversary of the Fed’s help with year end book keeping) is that old debt, and last year’s borrowings need to be repaid, and new equity or debt raised to keep things going “forward”?

If somewhat true, wouldn’t this surely indicate that all the wisdom, virtuosity and wit celebrated in Jackson’s Hole have only made “things” much, much worse.

Or, is something else going on which the details are pointing to, but not making transparent?

Debt roll-overs and pay-backs, in a timely way, do still seem to be key to the whole thing, borrow, pay interest on time, pay back what you borrowed on time, borrow more. Non-performance soon enough becomes default. The encore has to be international I guess.

]]> By: Yves Smith http://www.nakedcapitalism.com/2008/08/money-markets-still-stressed-conditions.html#comment-13472 Yves Smith Mon, 25 Aug 2008 06:07:00 +0000 http://www.nakedcapitalism.com/2008/08/money-markets-still-stressed-conditions-expected-to-worsen/#comment-13472 The piece is not that well written. I think the point is Libor spreads vs, other benchmarks, not its absolute level. Although I don't watch it, i have to imagine that Fed funds futures are trading lower because rate increase expectations have weakened. You'd expect Libor to move in sync. If it has stayed at more or less the same level, that would signal some nervousness.<br/><br/>If FF futures are more or less the same as they were before oil prices broke, then I'd be puzzled too.... The piece is not that well written. I think the point is Libor spreads vs, other benchmarks, not its absolute level. Although I don’t watch it, i have to imagine that Fed funds futures are trading lower because rate increase expectations have weakened. You’d expect Libor to move in sync. If it has stayed at more or less the same level, that would signal some nervousness.

If FF futures are more or less the same as they were before oil prices broke, then I’d be puzzled too….

]]> By: Anonymous http://www.nakedcapitalism.com/2008/08/money-markets-still-stressed-conditions.html#comment-13471 Anonymous Mon, 25 Aug 2008 05:40:00 +0000 http://www.nakedcapitalism.com/2008/08/money-markets-still-stressed-conditions-expected-to-worsen/#comment-13471 LIBOR rates haven't budged in a while. What data is this report looking at? LIBOR rates haven’t budged in a while. What data is this report looking at?

]]> By: doc holiday http://www.nakedcapitalism.com/2008/08/money-markets-still-stressed-conditions.html#comment-13470 doc holiday Mon, 25 Aug 2008 04:02:00 +0000 http://www.nakedcapitalism.com/2008/08/money-markets-still-stressed-conditions-expected-to-worsen/#comment-13470 Repackaged Synthetic Covered Bonds anyone? Repackaged Synthetic Covered Bonds anyone?

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