Rates volatility leaps after banks binge on ECB liquidity
Banks took up Eu213.7bn of seven day European Central Bank funding on Tuesday, a rise of Eu48.1bn from last week’s main refinancing operation, provoking instability in short-term funding rates.
The number of banks borrowing increased to 371, against last weeks 209.
The move pushed short term funding rates down, in line with market predictions. Eonia fixed at 1.313% on Monday, but by Thursday had dropped back to 0.526%.
CP dealers are concerned about the volatility in short term rates
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