The market mover of the day…

Lets break it down:
The Players: ECB(Euro), BOE(England), BOJ(Japan), SNB(Swiss), US Fed
What: These Central Banks will lend, at a fixed interest rate, US dollars in unlimited quantities to commercial lenders(Banks)
Why: Banks, especially in the Euro Zone, are having a hard time borrowing money, especially dollars. One of the main reasons is that US money market funds are understandably reluctant to lend to European banks creating a negative feedback loop of sorts. The banks have trouble borrowing because investors fear liquidity(or solvency) issues which leads to even further liquidity issues….and so on.
When: Three operations by the BOE, SNB, ECB on October 12, November 9 and December 7. The BOJ will do the same on October 18.
Result: They are trying to alleviate the above mentioned liquidity concerns in European banks. The ECB currently provides 7 day dollar loans every week. These new loans will be longer term(3 months).

Cheers-1689

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: