Europe's Sovereign Troubles Spreading To Europe's Banks

The latest data from the Federal Reserve shows foreign commercial paper outstanding is shrinking: November 248.4, December 230.2, January 217.1, February 218.5, March 211.8, April 192.7, May 178.2

Drip, drip, drip . . .

This is not what Trichet wants to see. When commercial paper starts drying up, especially when you're trying to inflate, you've got a big problem. Debt investors have a nasty habit of cutting back on buying commercial paper when they fear that firms will default on their debts. Slowly, European banks are becoming infected with same problems as their respective governments.

Total outstanding U.S. commercial paper issued by foreign & foreign-parent domestic banks is almost back to the Lehman crisis levels of 2008.

This is not good news if you're a bull.


Source: Federal Reserve