Funding squeeze for European banks get worse

Zero Hedge reports today on the worsening funding situation for European banks. The demand for cheap dollars were strong, not surprising, given the favorable terms:

As expected, virtually everyone, or a total of 39 banks (compared to 2 the week prior), scrambled to receive dollars from the ECB following the cut in the USD swap line rate from OIS + 100 to OIS + 50. Specifically, $50.7 billion in 84 day swaps (34 banks asking for dollars at a new and reduced rate of 0.59%) and $1.6 billion in 7 day swaps (5 banks at 0.58%) was just opened for a total of $52.3 billion. The expectation had been that just about $10 billion would be demanded, indicating how close to the cliff Europe’s banks had been.

However, Zero Hedge also notes that …  the funding squeeze has now shifted away from USDs and is impacting the EUR market itself, something the Fed has no control over.