A week ago, the ECB decided to lower its deposit rate to 0%. Today, we get
the first real full frontal visual of what this really means, and how banks
react under ZIRP. As the ECB just reported, overnight deposits parked in its
electronic basement by member banks plunged by the most on record, or
€484 billion in one session. This is a lot of money. And this
money has to go somewhere. Judging by the reaction in European equities, which
continue sliding, bank did not put the money in stocks. Also, judging by the
continued slide in the EUR and the daily record negative yields in core European
bonds, banks are aggressively buying up "safe" debt, as well as that of other
currencies, to place this ZIRP cash somewhere liquid regardless of location,
leading to one-time strange events like yesterday's WTF 10 Year auction. If
indeed the case, look for some serious insanity in the form of record Direct
take down in today's 30 Year auction. Which, along with other much more weird
things, is to be expected when one has a nearly half a trillion fund flow
overnight. One thing is certain: goodbye 0.25% deposit income on nearly €1
trillion in most German bank sourced cash.
ECB Deposit facility usage:
Daily change in the facility usage:
ECB Deposit facility usage:
Daily change in the facility usage:
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