The world was saved there briefly overnight after SNB’s giant liquidity shot into CS.
But it didn’t take long fort reality to sink in about the band-aid-like nature of this facility.
However, the situation under the hood may in fact be worse than some thought as Bloomberg reports, according to people familiar with the talks, that ECB Vice President Luis de Guindos told finance ministers on Tuesday that some European Union banks could be vulnerable to rising interest rates.
Guindos said that the ECB couldn’t rule out that some lenders might be at risk because of their business models, according to the people.
The market did not like that reality check with European IG credit spreads now above yesterday’s highs…
Guindos also cautioned not to be complacent and warned that a lack of confidence could trigger contagion.
Touching on a likely key theme of Thursday’s rate decision, Guindos highlighted the potential conflict between the ECB’s mission to bring down inflation and potential damage to some financial institutions from higher interest rates.
And after that headline on bank vulnerability, the odds of a 50bps hike today have tumbled…
What will Christine do?