European banks remain deep in the trenches, focused solely on shrinking their balance sheets and preparing for 600b euros of upcoming maturities in 2012. This is ever more evident as 485.9b euros were parked overnight with the ECB, another record high and just a few billion euros away from the total amount loaned for three years by the ECB. In one closet and then into another for a small fee but it seems the fee (the difference between the borrowing rate of 1% and the deposit rate of .25%) is a small price to pay to ease 2012 funding concerns. Just as seen in the US, in an environment of deleveraging, the cost of money just doesn’t matter in encouraging lending. Central bankers still believe otherwise as does a Fitch analyst who is stepping out of his job as a credit analyst and is calling for the ECB to print money as part of the solution saying they have “plenty of scope to expand its balance sheet without unleashing inflation in the euro zone.” Oh really? European bonds are rallying and interbank lending measures are narrowing again. Spain’s parliament votes today on the Dec 30th budget agreement. In the US, the MBA said purchases rose 8.1% and refi’s were up 3.3%. Also, investor sentiment continues to get more bullish as II said Bulls rose to 51.1 from 49.5, the highest since May 2011 and Bears fell to 29.8 from 30.5, the lowest since August 2011.