Which explains the focus on the deposition rate

Should we worry For the first time since October 10, the Euribor 3 months continued to relax. The interbank rate stabilizes at 1.4 for a week. On the other hand, the Eonia overnight interbank rates climbed 1 Tuesday, for the first time in two weeks. The gap with the main rate of the European Central Bank (ECB) refinance rate is thus reduced to 25 basis points. However, in recent months it tended to be much more important and even unusually high compared to before the crisis.

Market strategists are trying to explain the latest changes. Dresdner Commerzbank team, rumors circulated that most US banks would have failed to "stress test" (the test of resistance to the recession, Editor's note) partly justify the judgment of the lower Euribor. Moreover, the strategists of the German bank evoke concerns about 850 billions of euros of toxic assets that would hold the German institutions. In short, the money market is victim of a climate of distrust. Other analysts, the explanation is more technical. "The Euribor is deals with 15 points above the main interest rate of the ECB, it can hardly be closer still," says Patrick Jacq at BNP Paribas.

About Eonia, the explanation is of a different nature. This rate has tended to be calibrate these last months on the rate of the ECB deposit facility and on the rate of refinancing. This anomaly is that the rate floor of the Institute of issuance, representing the compensation granted to the banks on the funds they deposited every day, has become the market reference. Banks borrowed more than necessary with the ECB and, instead of reprêter their liquidity, them were stored each day in Frankfurt. Which explains the focus on the deposition rate. The money reached dizzying levels: early January, EUR 315 billion have been placed in one day! However, last Wednesday, less than 20 billion have been filed. It is the lowest amount since last fall. The trend is a sharp decline. "Resolve the excess liquidity, it is a sign of normalization," summarizes Patrick Jacq. The docking of the Eonia rate filing is therefore less reason to be.

Pressure on the ECB

To date, the market anticipates a decline in the rate of refinancing of the ECB of 25 basis points to 1 May 7. Most operators believe that it will not fall down. They also expect to non-conventional measures that would expand to twelve months the maturity of refinancing operations. So far, the ECB does lend only to six months, in particularly interesting conditions. To help the banks, the institution decided to lend to the refinancing rate, regardless of the requested maturity. It also agrees to provide all the funds required by institutions. This device explains in part the excess liquidity observed for months.

If the ECB made a new step in this direction, the level of liquidity in the system may go back and deposits also. The Eonia could interrupt its increase to the rate of refinancing. Euribor should also relax. Dresdner Commerzbank team also judge the current stabilization of the Euribor to put pressure on the institution chaired by Jean-Claude Trichet. It will this time not escape non-standard measures.