Economics
Brexit Stress Mounts in Funding Markets as Dollars Become Scarce
- Rising credit risk makes it costlier for banks to get funding
- Central bank swap lines will ultimately limit any fallout
Rate Uncertainty Embroils Central Banks
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Money markets are flashing warning signals as rising credit risk, spurred in part by fears of Brexit, makes it harder for big banks to obtain U.S. dollar funding.
A gauge of bank borrowing costs -- the FRA/OIS spread -- hit the most extreme level since 2012 on Thursday, and the premium to swap foreign currencies into dollars reached the highest since late last year as deteriorating investor sentiment ahead of Britain’s June 23 referendum on European Union membership strained the financial system.