In my mind there’s not much else to say about Libor in the Eurozone. The charts do all the talking for me:
The curve is shifting out at a rapid pace, in a bear steepening fashion. Looks like liquidity situation in Europe is getting worse, which keeps the Libor rates moving upward rapidly. And the Euro has followed suit:
This brings up an interesting point about the risk-on/risk-off trade: it depends on who you’re talking about. For most people in the world, the risk-on trade is to hold anything except dollars. Risk-off is to convert those holdings into dollars. For European banks, however, they have to convert everything back into Euros. So with the removal of Euro-denominated liquidity facilities, “risk-off” takes on a different meaning.
Regardless, the funding squeeze continues…