"The tightness in dollar funding continues to be a major problem for a number of EU banks. Much of it is driven by US money market funds
not rolling their commercial paper (CP) holdings issued by eurozone banks. As CP matures, European banks have to find alternate sources, which is proving to be difficult.
Yahoo Finance: “It is utter madness … When we see big names paying 300 basis points over overnight rates for dollars you know something is wrong,” said the head of money markets at a bank in London, who asked not to be named.
The non-US financial institutions’ commercial paper outstanding continues to dwindle:
This demand for term dollar funding keeps putting upward pressure on interbank lending rates as banks want to charge increasingly more to part with dollars for longer than overnight:
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| 3M USD LIBOR |
The ECB has responded by tapping the
Fed Liquidity Swap Facility this week in the amount not seen since 2009 in order to provide dollars to numerous eurozone banks..."
This demand for term dollar funding keeps putting upward pressure on interbank lending rates as banks want to charge increasingly more to part with dollars for longer than overnight:
