Recent move in 3M LIBOR
Does anyone have any insight into what is driving 3-Month LIBOR lower as of late? Ever since the new year it's been trending lower. Thanks.
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The USD Libor? I think the ECB's LTRO has eased conditions on the short-end of the curve in Europe but USD funding feels like the safe route right now if you can get it.
The Libor panel includes many of the big european banks and the ECB providing unlimited liquidity is most definitely the biggest factor behind the drop in libor. Euribor has gone down even further.
Ben Bernanke to the rescue
on a different but related note...CNBC reported last week that ECB expects the next 3yr LTRO to punch in around 1trln EUR...this is unprecedented balance sheet expansion and makes the ben bernank's late '08 money printing endeavor look amatuerish in comparison. I am long some XLF vs short EUR this could be the trade of the year.///
could you please expand on this? having LTRO as backdoor QE (and even then financials tanked in 08) is one thing, but going long XLF when there is a serious risk the banking system goes bust and has to be nationalized??
i am genuinely curious, not trying to be snarky or anything...
LTRO.Cash market moved massively first, LIBOR market catching up.
Note that XLF is US financials. Things aren't entirely rosy in the US but low rates, a strong dollar and massive liquidity from Europe should help US financials. If things really tank in Europe and US Financials suffer, the euro will most likely be cratering.
I am not rosy on the picture for US banking, but given how beaten down these stocks are alot of pain is already in the price. Further, the monetary policy could not be any better...the ECB is cranking up the printing press, the Fed will likely buy more mortgages if things deteriorate at all, and the Fed is pushing congress for a bill to aid the housing market. If the February ECB LTRO is as big as people think it will mean that we have seen more global central bank balance sheet expansion then we did in late 2008 and that led to a big 2009 for equities and financial stocks especially. I also think its equity positive that alot of banks are finally throwing in the towel and starting to fire people en mass which is definitely happening and will continue.
Don't you think the 2009 bump though was due to people actually thinking that QE2 was the bullet that would end the crisis. While now in 2012 people do not think the same way with any matter of balance sheet growth and printing by central banks. Would that not result in making it very tough for banks to rally this year?
You must already be well in the $$$ on this trade this year though as well no...
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