2.71 2.77 2.76
6 basis points is market error, transaction costs exceed that, the banking curve is contracting, the Fed is getting an earful, the ECB is in trouble, Turkey will be defaulting big time in euros, trade slow down. Everyone but us has contracted.
It could ber short, we may get quick refinancing, but the liquidity flow went to zero somewhere in the bank chain and the chain contracts.
I speculate the problem is France. The ECB StoL queues have reorganized, the borrowers are Club Med, the depositor is Germany; and that will not hold, that is likely what happened. Unbalanced queues cause huge market making bit error, which cannot be paid since Germany would have to pay it. The contraction we see in the curve is likely the coherent reaction to large German banks feeling the risk. The large German banks now hold their own default insurance, there is France no more.
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