The central banks of major economies worldwide have surprised the markets. The ECB, U.S. Federal Reserve (Fed), the Bank of Canada, the Bank of England, the Bank of Japan and Swiss National Bank announced Wednesday concerted action to prevent any lack of liquidity in the international financial system.
This announcement delighted the European financial centers. After a difficult start of the meeting, the CAC 40 soared in the afternoon to finish up 4.22% on Wednesday. The Milan Stock Exchange was closed on it jumped 4.38%, the Madrid Stock Exchange has sold for 3.96%, the Frankfurt 4.98% while the London Stock Exchange gained 3.16%. Even the Athens Stock Exchange finished up (3.13%).
The announcement central banks?They agreed to reduce by half a point, effective December 5, the cost of liquidity in dollar swaps in progress. In addition, agreements have been extended until February 1 2013.Concrètement: the supply of dollars by the ECB and other central banks to private banks will now at a reduced cost of 0.50% compared to today due to a recalculation of the interest rate.
These concerted operations in dollars between central banks had already been performed during the financial crisis in 2008 and 2009. They resumed in September last face the difficulties of European banks. But they have met with almost no success. The last operation conducted by the ECB attracted only two banks in the euro area at a rate of 1.08%, amounting to $ 352 million. For comparison, the last weekly refinancing operations in euros carried by the ECB for European banks has attracted nearly 200 institutions for a volume of 265 billion euros. "The dollar operations have not been successful because the cost of borrowing was too high, says Jean-Francois Robin, strategist at Natixis. Today, it becomes much more interesting."
Other ad: bilateral swap agreements (currency exchange) will now be possible so that a bank can refinance in its own currency if necessary. The ECB may, for example exchanging euro against the yen with the Bank of Japan, and provide the Japanese currency to European banks that need it.
What are these measures?The bilateral swap arrangements have not yet great interest: there is currently no need to provide liquidity in currencies other than the dollar. It is mainly a preventive measure to ensure that such operations can be implemented quickly if the need arose. The decrease in the cost at which banks can refinance themselves in dollars, however, offers a breath of fresh air to European banks. Recent victims of mistrust of U.S. banks vis-à-vis the crisis in the euro area, meet for several months very difficult to borrow dollars in the interbank market. Now they are very exposed to the dollar since much of their business is done in the currency of Uncle Sam (investment activities in the markets, business loans for the purchase of products such as oil, etc.. ). The measure announced by the central banks has significantly eased the pressure off the values of the sector at the Bourse de Paris, Credit Agricole has awarded 8.37% Wednesday, Societe Generale and BNP Paribas 4.63% 4 also , 63%. Appeasement also took to the interbank market: the three-month Euribor, the main rate in the euro zone, fell to 1.473% against 1.477% yesterday.
This action does it solve the crisis in the euro area?"The announcement of central banks is a relief, this should significantly ease the panic on European banks and prevent a credit crunch," said Jean-Francois Robin. In short: this solves the liquidity crisis faced by European banks and eliminates the risk of a credit crunch. But fears about their solvency remain. Because the roots of the crisis in the euro area, namely public debt and high growth prospects near-zero, they are still unresolved. It is therefore likely that the relief recorded in the bond market Wednesday is only temporary.In the absence of political progress in resolving the crisis and a more incisive of the ECB, the pressure on the rates of countries in the euro area should reappear.
by http://businesnew.blogspot.com/
This announcement delighted the European financial centers. After a difficult start of the meeting, the CAC 40 soared in the afternoon to finish up 4.22% on Wednesday. The Milan Stock Exchange was closed on it jumped 4.38%, the Madrid Stock Exchange has sold for 3.96%, the Frankfurt 4.98% while the London Stock Exchange gained 3.16%. Even the Athens Stock Exchange finished up (3.13%).
The announcement central banks?They agreed to reduce by half a point, effective December 5, the cost of liquidity in dollar swaps in progress. In addition, agreements have been extended until February 1 2013.Concrètement: the supply of dollars by the ECB and other central banks to private banks will now at a reduced cost of 0.50% compared to today due to a recalculation of the interest rate.
These concerted operations in dollars between central banks had already been performed during the financial crisis in 2008 and 2009. They resumed in September last face the difficulties of European banks. But they have met with almost no success. The last operation conducted by the ECB attracted only two banks in the euro area at a rate of 1.08%, amounting to $ 352 million. For comparison, the last weekly refinancing operations in euros carried by the ECB for European banks has attracted nearly 200 institutions for a volume of 265 billion euros. "The dollar operations have not been successful because the cost of borrowing was too high, says Jean-Francois Robin, strategist at Natixis. Today, it becomes much more interesting."
Other ad: bilateral swap agreements (currency exchange) will now be possible so that a bank can refinance in its own currency if necessary. The ECB may, for example exchanging euro against the yen with the Bank of Japan, and provide the Japanese currency to European banks that need it.
What are these measures?The bilateral swap arrangements have not yet great interest: there is currently no need to provide liquidity in currencies other than the dollar. It is mainly a preventive measure to ensure that such operations can be implemented quickly if the need arose. The decrease in the cost at which banks can refinance themselves in dollars, however, offers a breath of fresh air to European banks. Recent victims of mistrust of U.S. banks vis-à-vis the crisis in the euro area, meet for several months very difficult to borrow dollars in the interbank market. Now they are very exposed to the dollar since much of their business is done in the currency of Uncle Sam (investment activities in the markets, business loans for the purchase of products such as oil, etc.. ). The measure announced by the central banks has significantly eased the pressure off the values of the sector at the Bourse de Paris, Credit Agricole has awarded 8.37% Wednesday, Societe Generale and BNP Paribas 4.63% 4 also , 63%. Appeasement also took to the interbank market: the three-month Euribor, the main rate in the euro zone, fell to 1.473% against 1.477% yesterday.
This action does it solve the crisis in the euro area?"The announcement of central banks is a relief, this should significantly ease the panic on European banks and prevent a credit crunch," said Jean-Francois Robin. In short: this solves the liquidity crisis faced by European banks and eliminates the risk of a credit crunch. But fears about their solvency remain. Because the roots of the crisis in the euro area, namely public debt and high growth prospects near-zero, they are still unresolved. It is therefore likely that the relief recorded in the bond market Wednesday is only temporary.In the absence of political progress in resolving the crisis and a more incisive of the ECB, the pressure on the rates of countries in the euro area should reappear.
by http://businesnew.blogspot.com/
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