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Reuters reports today on the ECB's operatipns:
"Euro zone banks' demand for European Central Bank funding surged to a two-year high on Tuesday, as fast spreading sovereign debt worries left lending markets virtually frozen and the ECB the only available funding option for many institutions".
The ECB's weekly, limit-free handout of funding underscored the widespread problems on Tuesday with 178 banks requesting a total of 247 billion euros.
This amount is the highest since mid-2009.
IFR strategist Divyang Shah: "We don't need to look far for signs of tension in the money markets, with the ECB acting as the main intermediary with 1) deposits parked at ECB at elevated levels and 2) MRO usage also now increasing sharply,"
"The ECB is the main vehicle through which the money markets are able to make transactions, highlighting that we have not just a liquidity crisis on our hands but also heightened concerns over solvency,"
The TED spread continued to surge higher, reaching a new 2-year high:
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