Banks Brace for Funding Stress

The video discusses the euro dollar cross currency basis, highlighting its recent widening due to stress in the market, particularly linked to Deutsche Bank. It compares current levels to past financial crises and explains how central banks are better prepared now. The video also examines funding levels, market reactions, and the impact of Japan data, noting a global scramble for dollar funding. It concludes with an analysis of Sterling's decline, influenced by Brexit concerns and investor sentiment.

What is the current state of the euro-dollar cross currency basis compared to past financial crises?

• It is at the same level as during the 2008 crisis.

• It has widened to levels seen in 2012 but is not as severe as 2008 or 2011.

• It is narrower than during the European sovereign debt crisis.

• It is at its narrowest since 2012.

How have central banks prepared for current market stresses compared to 2008?

• They have reduced liquidity in the market.

• They have increased interest rates significantly.

• They have established standing facilities and flooded the market with liquidity.

• They have taken no action.

What does a spike in the Fryer YS chart indicate?

• Stability in the euro area funding levels.

• A decrease in dollar funding costs.

• A potential sign of credit nervousness among interbank counterparties.

• Increased confidence among interbank counterparties.

What is one of the drivers of the recent scramble for dollar funding?

• An increase in euro funding availability.

• A decrease in global interest rates.

• Regulatory changes in US money markets.

• Investor confidence in Deutsche Bank.

What has been a major concern for investors regarding the British pound?

• An increase in the euro's value.

• A decrease in Bank of England's interest rates.

• A significant rise in UK manufacturing PMI.

• The possibility of a hard Brexit.