"Wednesday’s central bank intervention is impressive in its symbolism but unlikely to do much more than buy eurozone leaders a few days.
RBS’ US rates team has provided a useful analysis of the move. The immediate background to the intervention, according to the strategists, is that European institutions have been having trouble funding in the US repo market so have turned to the currency markets instead — buying USD then reversing the transaction three or so months later. Hence the recent stress in the currency basis swap markets..."
at http://ftalphaville.ft.com/blog/2011/11/30/773761/the-collateral-limits-of-coordinated-action/
RBS’ US rates team has provided a useful analysis of the move. The immediate background to the intervention, according to the strategists, is that European institutions have been having trouble funding in the US repo market so have turned to the currency markets instead — buying USD then reversing the transaction three or so months later. Hence the recent stress in the currency basis swap markets..."
at http://ftalphaville.ft.com/blog/2011/11/30/773761/the-collateral-limits-of-coordinated-action/
