Foreign Banking Stress

I am not going to pretend that I understand the subject matter ahead completely, but I can read a chart and see correlations. If it were not for the subject of the current financial environment feeling a lot like the Lehman failure era and the correlations presented in this post, I wouldn't even bother, but some members smarter then me on the subject will surely have some insight and if nothing else, we can all see the correlation to the Lehman period.

Foreign Reserve Repos with the FAD (as released today) have gone from $81.3 BB to $124.5 BB this week alone, in response the the MF Global bankruptcy. This is the largest amount ever and the second biggest weekly increase which is second only to the Lehman collapse.

Because of "systemic uncertainties" due to the MF Global bankruptcy, foreign banks have effectively pledged whatever treasuries they have left to essentially put money in the safety of the FAD.

This type of reverse repo is considered a leading indicator of correlated to the inverse performance of European Financial stocks.

Now that probably makes as much sense to you as me, but what will make more sense are the charts.

 Please take note of the dates.  This is the change in the weekly international reverse repos. The last time we were at this high, Lehman was failing as you can see at the spike at the left and the dates below.

This is the total international reverse repo notional which is at a new record high with the previous high around the date of the Lehman failure.

What I can say is this is liquidity being drained from European banks and put in safe storage at the Fad and is a direct result of the MF Global bankruptcy. There's also a clear correlation between this level of activity and international banking stress.

I'll try to bring you better perspective on the issue and feel free to email me with any knowledge you have about these international reverse repo operations.