European money markets will likely still be under stress six months from now with the eurozone sovereign debt crisis showing no signs of easing, according to a majority of money market traders polled by Reuters. Twelve of 18 traders who gave an answer in a weekly money market poll said market conditions would remain about the same in six months, while five said they would be better. Only one said they would be worse.
The markets are dysfunctional, with banks lacking the confidence to lend to each other freely and often choosing to park their money with the European Central Bank instead. "The money market is completely closed, almost nothing is going on in the interbank (market)," said a money market trader. The ECB tried to kick-start activity last month with an injection of cut-price three-year loans that drew demand for nearly 490 billion euros of funds.
But lenders have since then deposited the bulk of that sum back at the central bank, with overnight deposits holding consistently above 400 billion euros. The ECB is expected to allot 135 billion euros ($174 billion) at the first seven-day refinancing auction of 2012 after last week's 145 billion intake. Traders polled said the ECB likely spent 1.5 billion euros on peripheral debt under SMP bond buying programme last week, compared with 19 million euros in the week to December 23, which took the total amount spent to 211 billion euros.
Comments
Comments are closed.