A Second Dip in the Euro Area Money Market in 2011? Interbank Risk Premia and the ECB Bonds and Money Markets Policy
After two years of relative stability, the three-month spread between bank offered rates (BOR) and Overnight Indexed Swaps (OIS) in the euro area has quadrupled between July and December 2011 and has reached more than 100 basis points. This sharp increase is also observed in the spread between euro-denominated general collateral repos (EUREPO) and EURIBOR, which is another measure of interbank risk premia. This phenomenon has two outstanding characteristics. Firstly, it is not caused by an increase in the EURIBOR rate. Contrary to the 2007-2008 crisis, the increase in interbank spreads is caused by a stabilization of the EURIBOR rate, combined with a decrease in the OIS and EUREPO rates. Secondly, the term structure of EURIBOR shows a normal, positive sloped yield curve. Using specific monetary policy announcements and financial indicators database, our tests show that in the second half of 2011 unconventional actions did not always have a claiming effect: Liquidity provision and assets buyout announcements decreased interbank markets strains, whereas interest rates decisions seem to have had an unexpected stressing effect.
Volume (Year): 1 (2013)
Issue (Month): 1 ()
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