Maximum intervention just moved into a higher gear, as the Central banks of the US, the Eurozone, the UK, Switzerland and Canada announced that they would lower the margin they charge over US Dollar overnight index swaps from 1.0 percent, to 0.5 percent. The accompanying statement said, 'The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and help foster economic activity'.
The aim is clear-to unclog sclerotic interbank lending markets, where an increasing number of banks have been excluded from access to liquidity, or at least to reduce the price they have to pay for same.
Combined with this week's failure by the European Central Bank, (ECB), to completely sterilize its purchases of stricken peripheral bonds, this will increase speculation that the next official step may be for the ECB to bow to pressure to become the lender of last resort to Eurozone
states; risk-on for now.
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