Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Display:
The Cost of 'Reform' | 21 comments (21 topical, editorial, 0 hidden)
Re: Hehe! (none / 1)

Money markets signal fears over banks

Money markets in the US and Europe are signalling renewed fears about the financial strength of banks, with key confidence barometers almost returning to the levels that preceded the collapse of Bear Stearns.

The concerns are being highlighted by the difference between overnight lending rates set by central banks and three-month Libor, the rate at which banks lend to each other. This spread, known as the overnight index swap rate, has been rising in the US and remains elevated in Europe, indicating that banks are reluctant to lend to each other.



In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Wed Apr 9th, 2008 at 04:27:52 PM EST
[ Parent ]
Re: Hehe! (4.00 / 2)
That chart indicates that, if anything, the interbank rate drives the base rate. Changes in the base rate have no effect on the interbank rate.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Carrie (migeru at eurotrib dot com) on Wed Apr 9th, 2008 at 04:36:44 PM EST
[ Parent ]
Not necessarily (4.00 / 2)
It can also mean that the central bank communicates effectively in advance what it will do, and thus the markets anticipate its movements correctly - they're "priced in" in advance.

What's more noticeable are the big jumps, which mark the times of financial acute crisis, and which suggest that we're entering a new one now.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Wed Apr 9th, 2008 at 04:57:27 PM EST
[ Parent ]

The Cost of 'Reform' | 21 comments (21 topical, 0 editorial, 0 hidden)
Display: