Post Tagged with: "money market funds"
Chart of the Day: European bank funding starting to dry up
Today, it is euro banks that are the problem. For example, Goldman Analyst Alan Brazil suggests that euro banks need $1 trillion in additional capital. This has created distress in funding markets, particularly because of US money market funds concerned about exposure to European banks. And people are looking to track that distress Euro FRA/OIS is one way
Financing world trade – Buy the dollar
Andy Lees argues insufficient dollars are getting into the system from the US current account deficit to finance the growth in global trade, so the stock of these international dollars is falling relative to the value of world trade. He says this means the dollars are either getting in through other means to finance global trade, or as appears to be happening over the last couple of months, global trade will have to slow
More on US Money Markets As a Channel of Contagion
There has been a net withdrawal from US money market funds and it appears that the funds have moved to strictly US Treasury or US high grade money market funds. Banks appear to be responding by hedging/securing funding through yen swaps. In addition, the European banks may be more aggressive in borrowing from the ECB in its weekly facility. Last week’s operation saw a larger than expected take down of over 50 bln euros. This week’s operation may offer more insight
FT: Flight from money market funds exposed to EU banks
The fact that this withdrawal of liquidity has already begun, though, does make the situation more acute. The question is what to do about it. It seems to me that the present path is not instilling a sense of confidence in investors
Fitch: US Money Fund Exposure to European Banks Remains Significant
The following report by Fitch from Tuesday highlights the cross-Atlantic channel through which credit market volatility could spread. US money markets have significant exposure to the European banking system. The worry is that a Greek default or restructuring could produce a panic in which these funds would limit funding of European institutions
Hoenig: Restrict bank activities to core services
Below are extracts of a paper formulated by Thomas Hoenig, the President of the Federal Reserve Bank of Kansas City, to better regulate the US Financial sector. His overarching aim is to isolate core banking activities that are protected by a government guarantee from riskier investment banking and trading activities