Sunday, 15 June 2008

Conditions update from the ECB Part II

A few more items that interested me from the ECB document discussed earlier.

The Turn. The spike in rates over year end is known to interest rate traders as the turn. Look at how it intensified in 2007 vs. earlier years:

Country Linkages. A fascinating graphic of the interbank linkages between countries:

Delevergage. The change in typical repo/securities lending haircuts from March 2007 to a year later:

The procylicality of securitisation. The ECB finds that securitisation assisted the supply of credit in the good times:
the spectacular increase in securitisation activity in the euro area, coupled with the low level of bank risk and favourable financial conditions of banks, seem to have had a positive effect on the supply of credit
But crucially there is a negative effect on credit supply when the securitisation market becomes more difficult:
the importance of the bank lending channel changes over time and deterioration in the business cycle or the financial condition of banks could have an adverse affect on bank loan supply.


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