Just a few days ago, the European Central Bank (ECB) took €820.8 billion (about $1.08 trillion) in overnight deposits, a record amount. Last night deposits totaled €727.74 billion, considerably lower, but higher than Wednesday’s total of €686.43, the lowest since the second of the ECB’s long-term refinancing operations (LTRO) on February 29th.
On Thursday night, European banks borrowed €992 million from the ECB, down from €1.787 billion Wednesday. Last Monday, overnight borrowing jumped to €15.61 billion, the highest since the end of last year.
Europe’s banks recently closed a reserve maintenance period during which they kept more liquidity on deposit than they might normally do. Purchases of Spanish and Italian bonds over the past week have likely relied heavily on the latest infusion of ECB liquidity. There’s still not a lot of evidence that the LTRO funds are getting outside the doors of any of the banks except in this variation of a carry trade.