ECB Gives Banks Another Fix

Wednesday, September 12, 2007

Eurozone banks scrambled for another round of freshly minted money handed out by the ECB in dimensions not seen before.
Two weeks after their last extraordinary 3-month repo with a volume of 50 billion Euros the ECB injected another 75 billion Euros into the money market at markedly higher rates on Wednesday after draining 60 billion on Tuesday. This contradicts the calm picture ECB president Jean-Caude Trichet had delivered to the European Parliament only a day earlier.
The new 3-month tender was allotted at a marginal rate of 4.35% and a weighted average of 4.52% or 10 basis points lower than the last 3-month repo but still significantly above the ECB's target rate of 4%. The 3-month Euribor was quoted at 4.74% on Wednesday.
The ECB website does not offer information about the actual volume banks bid for and in genral does not provide a conclusive overview of its money creation process. The ECB's website also lacks all the statements about the money market handed out to the wire services. Not exactly an example of parallel information.
The Fed NY does it comparably better here. The Federal Reserve allotted $13 billion in a one-day repo today out of a total bid for $41 billion at rates just below 5%.
According to the latest weekly financial statement the ECB's balance sheet grew 50 billion to 1,207 trillion Euros, mainly through the refinancing operations. The trash can, called other assets, was served with a gain of 5 billion and now stands at an unprecedented 260 billion Euros.


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