Last June they were more than 1000 to 442 billion

The signal is encouraging. Yesterday, the banks of the euro area had the opportunity, for the last time, to borrow funds from the European Central Bank (ECB) for a period of 6 months, the longest maturity proposed so far by the Institute of issue. Expectations were heterogeneous, but, on average, the experts felt demand 70 billion euros. In the end, financial institutions were required only EUR 17.8 billion. They were also not more than 62 to participate in the auction. For comparison, last December, when the ultimate 1 year refinancing operation took place, 224 banks participated, for an amount of EUR 97 billion. Last June, they were more than 1,000 to 442 billion. The fall reflects a standardization of the monetary market. "Today, the liquidity provided by the ECB is not at all cheap for good quality borrowers, especially as they get funds deposited assets in guarantee," said Credit Agricole CIB team. In fact, it is more interesting to borrow on the interbank market (non-pledge), given that the Euribor 6 months evolves on its lower levels, at 0.94, or more of 5 basis points below the rate of refinancing of the Central Bank. "The operation yesterday targeted stakeholders really need liquidity and are unable to obtain it otherwise."

Which then 62 facilities came seeking the ECB The Institute of broadcast will not deliver their names. But, on the market, it evokes the Greek banks and Irish banks, which would have trouble finding funds to their European counterparts. "In fact, Irish institutions borrow much more than the Greeks with the ECB", provides Laurent Fransolet, at Barclays Capital. According his calculations, they have are funded in January to 85 billion euros, then that Greek banks took only 47 billion in Frankfurt. According to him, the Irish institutions may also increase their use of the ECB in the coming months. The small European banks are also probably still dependent on the institution.

The weakness of demand yesterday also takes the fact that the national central banks have apparently stepped up their monitoring of the refinancing operations and could deter some actors identified to participate in the auction.

200 billion given each night

"The auction Wednesday augurs a fall of liquidity the retirement of the 442 billion euros from a year ago", warns Patrick Jacq at BNP Paribas. The passage of July is a crucial step: the banks will have to make the ECB record amounts collected in June 2009. If they do not resume liquidity to prepare this deadline, the excess that we know will brutally narrowed (without so develop into shortage).

The amount of liquidity in the system is important insofar as it is the variable which determines the level of Eonia, the interbank rate on the day the day. The massive injection of liquidity on the part of the ECB policy took effect to bail out banks beyond their needs, so that they lay each day to the institution of issue these unused amounts. More than 200 billion euros are still presented each evening. If the amounts fall, the Eonia will be more magnetized by the rate of the ECB (at 0.25) deposit facility, but by the rate of refinancing (at 1).