Fol­low­ing yesterday's shove-liquidity-down-your-throat-of-last-resort action by the Fed et al. 3M USD Libor fell, admit­tedly mar­gin­ally, for the first time since July 25th. The 0.1bps com­pres­sion was prac­ti­cally insignif­i­cant as only 4 of the 18 mem­ber banks actu­ally reduced their bids — Citi, Rabobank, RBC, and UBS but we are sure head­lines will crow of the impact the coör­di­nated cen­tral bank action has had already. What is most con­cern­ing when we look at the indi­vid­ual Libors of each mem­ber is one bank stands out over the last few weeks. Given that we know the dol­lar fund­ing mar­ket is highly stressed (USD-cross cur­rency basis swaps), this appears to be the only effi­cient way to under­stand which bank might be under the most stress. Given Credit Agricole's notably weak Tan­gi­ble Com­mon Equity Ratio and the fact that its Libor was such an out­lier recently, it is hard not to sus­pect the global stick-save was insti­gated because this $1.59tn asset-heavy bank was on the verge of failure.

Credit Agricole's bor­row­ing rate has been an out­lier for the last few weeks sug­gest­ing, given the dol­lar fund­ing stresses we know exist, a far greater desire to bor­row USD than the rest of the mot­ley Libor crew.

And given Credit Agricole's 2nd worst posi­tion on Bloomberg's Tan­gi­ble Com­mon Equity Ratio screen (behind Lan­des­bank Berlin no less), it is hardly sur­pris­ing that the giant French bank is suf­fer­ing. At 66x lever­age, it is per­haps no won­der the mas­sive French bank was will­ing to pay up to 13bps more for 3M USD than the aver­age Libor in early Novem­ber, and still 7bps more (around a 15% pre­mium).  As an aside, the whin­ing out of Deutsche Bank this morn­ing (to be dis­cussed shortly) that "using the swap lines is not stig­mata" is per­haps under­stand­able con­sid­er­ing their posi­tion in the "weak­est TCE Ratio" screen is third worst, just behind CA.

Charts: Bloomberg

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