Posted on 11/30/2011 7:12:04 AM PST by SeekAndFind
All the world's central banks have just announced a big coordinated intervention to lower swap rates.
What does that mean?
Basically this: European banks have been parched for liquidity, and need access to dollars. The ECB can't supply them dollars unless it borrows them from the Fed.
Essentially today's action makes it easier for the ECB and thus European banks to borrow dollars.
It's not a solution to the euro crisis by any means; it just means that the most acute liquidity problems will be mitigated for now.
The market is loving the news.
US markets had been down by 0.5% at one point this morning, but now futures are pointing to a 3% gain. Dow futures are up 2.83%.
Note that there are some other bullish things going on today. China lowered its Reserve Requirement Ratio also this morning, and we got a strong ADP jobs report.
So, lots of bullish action going on.
(Excerpt) Read more at businessinsider.com ...
European Central Bank Decision:
The Governing Council of the European Central Bank (ECB) decided in co-operation with other central banks the establishment of a temporary network of reciprocal swap lines. This action will enable the Eurosystem to provide euro to those central banks when required, as well as enabling the Eurosystem to provide liquidity operations, should they be needed, in Japanese yen, sterling, Swiss francs and Canadian dollars (in addition to the existing operations in US dollars).
The ECB will regularly conduct US dollar liquidity-providing operations with a maturity of approximately one week and three months at the new pricing. The schedule for these operations, which will take the form of repurchase operations against eligible collateral and will be carried out as fixed-rate tender procedures with full allotment, will be published today on the ECB’s website.
In addition, the initial margin for three-month US dollar operations will be reduced from currently 20% to 12% and weekly updates of the EUR/USD exchange rate will be introduced in order to carry out margin calls. Those changes will be effective as of the operations to be conducted on 7 December 2011. Further details about the operations will be made available in the respective modified tender procedure via the ECB’s Website.
Information on the actions to be taken by other central banks is available on the following websites:
Bank of Canada (http://www.bankofcanada.ca)
Bank of England (http://www.bankofengland.co.uk)
Bank of Japan (http://www.boj.or.jp/en)
Federal Reserve (http://www.federalreserve.gov)
Swiss National Bank (http://www.snb.ch)
Mike
The Dow is up 3.35%. This means the economy is booming, right? (sarcasm)
COORDINATED INTERVENTION....must be newspeak for MANIPULATION....
I agree with Tyler Durden at Zerohedge...
One of our most watched indications of the pressure on European funding markets is the EUR-USD cross-currency basis swap. This simple trade is a way for European entities to take the excessive EUR funding they can get from the ECB and ‘swap’ it into USD to meet their significantly problematic USD funding needs.
It has smashed higher (well lower in the charts) as the cost of the transaction moves with demand for the swap - indicating that demand for USD is huge and we are in as much of a liquidity crisis as we were in the middle of the 2008 critical period. What is fascinating to us is today’s reaction - a 22bps jump - while being large, merely moves us back to the same levels of stress we were at one week ago.
So even if this is seen as some huge form of liquidity surge, it seems not to have even solved the liquidity problems of banks, let alone solvency problems.
The FED just bought Europe a few weeks at most... don’t be suckered into getting into the Euro market.
So..............making it easier for lots more banks to borrow lots more is bullish?
How does borrowing lots more money fix the problem of too much debt?
Bet on it.
http://www.cnbc.com/id/42794512/The_Fed_Will_Make_Sure_Obama_Wins_in_2012_Strategist
It’s just bits in a computer somewhere.
What we are seeing is hyperinflation. Watch the price of all commodities.
COORDINATED INTERVENTION....must be newspeak for MANIPULATION....
Bada Bing!...
Get those printing presses running at high speed! We need more money in the system!
A BIG train wreck is a’comin...
Gold surges too...because it’s all on the credit card, yet again.
Crude’s up $1.68 at the moment, and gold’s up $27.60....
It's just getting started, Gilligan...
Only key commodity not up at the moment is nat gas.
What is to stop the central banks from buying up chunks of debt and then writing it off? I don’t see this stuff ever being paid back, not entirely anyway, so that means somebody must write it off eventually.
It's like finding a great sale on patio furniture while the fireball of the approaching meteor continues to grow larger in the sky.
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