Who doesn’t like a discount?

Who doesn’t like a discount? In response to last Wednesday’s Fed move to lower the cost of borrowing US$’s from it was enough to spur a sharp jump in the amount of borrowing specifically in Europe. The ECB lent euro zone banks $50.7b for 3 months vs $395mm loaned in an auction last month. Euro zone banks also borrowed $1.6b for a week from the ECB vs $352mm last week. The euro basis swap is falling to a 4 week low but euribor/ois remains near recent highs and US$ 3m LIBOR is as well. Part of this though is year end funding needs that are rising. With respect to yesterday’s late day FT article that mentioned the possibility of the EU combining the EFSF and ESM (a story that has been discussed many times in the past), a German official said they are against it. As we approach tomorrow’s ECB meeting and Friday’s EU summit, at this point for markets in the short term it all comes down to whether the ECB prints or doesn’t print. In Oct, German IP rose more than expected but IP fell more than expected in the UK. In the US, the MBA said refi’s rose by 15.3% after 3 weeks of declines that sent it to the lowest level since July and purchase apps, positively, rose to the highest since April as the avg 30 mortgage rate fell to 4.18%, a new multi decade low. II: Bulls 47.4 v 44.2 Bears 29.5 v 30.5

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