From Nouriel Roubini’s RGE Monitor. See second story from the top:
On Sep 30: Libor 431bps to an all-time high of 6.88% after the U.S. Congress rejected the 700bn bank rescue plan. Two-month euro Libor rose to 5.13% today, also a record. The Libor-OIS spread, widened to 246 basis points, showing cash scarcity is at a record. TED spread, was at 338 basis points today after breaching 350 basis points for the first time yesterday (TED was 11bps one month ago)
Fed increases the size of previously arranged currency swaps with foreign central banks to $620 billion from $290 billion to make more dollars available to banks worldwide.
If continued central bank liquidity injections don’t re-open financing markets, the CBs have 2 more options: 1) moral suasion to encourage banks to lend to each other, spot and for term; 2) concerted rate cuts, which have become more concrete as a possibility since this concerted action. Expects CBs will be prepared to move forward very quickly if today’s actions don’t start working in pretty short order
Roubini: The next step of this panic could become the mother of all bank runs, i.e. a run on the trillion dollar plus of the cross border short-term interbank liabilities of the US banking and financial system as foreign banks are starting to worry about the safety of their liquid exposures to US financial institutions
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