dinsdag 10 juli 2012

ECB Rate Cut and its Effect on Euribor

On Thursday 5 July 2012, the ECB cut its main refinancing rate to 0.75% and its deposit rates to 0%. After LTRO I and LTRO II, we have another stimulus to supply credit to the markets.

In my previous article on LTRO I, I noted that the Euribor was manipulated lower to make it easy to lend (Chart 1). 

Chart 1: 3 Month Euribor

But it wasn't working out for the markets, because all the money was kept at the ECB deposit facility (Chart 2).
Chart 2: ECB Deposit Facility

Then, we got the interest rate cut of the ECB, and that lowered the Euribor another step from 0.64% to 0.55% as witnessed on Chart 1 (see the little spike downwards).

So what does all this mean for you? Read the analysis here.

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