(Corrects projected ECB rate cut in 16th paragraph)* Dwindling volumes cast doubt on ECB depo cut efficacy* Forward overnight rates too low if depo stays at zeroBy Kirsten DonovanLONDON, Aug 20 Dwindling money market trading volumes suggest the European Central Bank's cut to zero in its overnight deposit rate may have backfired, leaving the market's slim expectations of further easing looking overdone. The ECB cut the rate it pays for overnight deposits to zero from 25 basis points on July 5 in a bid to encourage banks to lend to one another rather than park cash at the central bank. But total volume for trades on which the Eonia overnight rate is calculated has fallen to about 20 billion euros a day since the ECB's move, according to Thomson Reuters data. This is the first time it has been so consistently low since at least mid-2007. Even accounting for the "summer lull", that is around 5 billion euros a day lower on average than over the same period in 2011.
"It's backfired massively, there's no volumes going through the market," one trader said."A lot of the funds can't trade without making a return so they're just closing and while the ECB may have hoped banks would lend for longer time periods, you can't expect them to just reinstate credit lines."Part of the problem, the trader said, was that any bank's credit rating is directly tied to that of its sovereign, with rating agencies typically downgrading banks within a couple of days of cutting a country's ratings."While the rating agencies are still putting banks on negative watch credit lines are still going to be decreased not increased," he added.
JPMorgan Chase & Co, BlackRock Inc, which is the world's largest money manager, and Goldman Sachs Group Inc restricted investor access to European money market funds immediately after the ECB's deposit rate cut."There's no incentive to participate in money markets anymore given the low margins and low rates," said Commerzbank rate strategist Benjamin Schroeder. The overnight rate is currently around 11 basis points, but forward rates are as low as 4 bps by year-end, indicating some modest pricing in of a further cut in the deposit rate to negative -- an unprecedented move for the ECB. Schroeder said even this looked overdone and left room for forward Eonia rates to rise.
"Eonia turnover has now consistently dropped... This should give the ECB further second thoughts about entering into uncharted territory," he said."Lower volumes should...support the current elevated Eonia/ deposit facility rate spread at the current level of around 11 basis points. While the overnight rate could potentially be anchored, Euribor rates, the main gauge of unsecured bank-to-bank lending, continue to fall on expectations the ECB will cut its main refinancing rate. A poll conducted immediately after the ECB's policy meeting in August showed expectations the refinancing rate would be cut by 25 bps to 0.50 percent in September. That would mean the spread between Euribor and overnight rates -- a popular trade -- would narrow. The three-month spread is currently at around 23 bps."Part of the compression in the spread is down to the refi rate cuts being seen as more likely than depo rate cuts. Euribors seem to be orientating themselves to a larger degree to the refinancing rate."Three-month Euribor rates eased on Monday to 0.325 percent from 0.334 percent on Friday.
(Corrects paragraph 15 to say LivHome is in 15 locations instead of 15 states, and that company "charges by the hour depending on what is needed" instead of "$135 an hour for ongoing care.")By Beth PinskerNEW YORK, March 24 You get that call - all is not right with mom or dad. Suddenly, you have to step in and take over a life's worth of financial details. For most people, this call comes too soon, before relatives have passed along key information about accounts and passwords, causing panic. But it's still a daunting task even for those who have planned ahead. Just ask Diana Raab, 60, who lives in Santa Barbara, California, while her 84-year-old mother lives in New York. Raab, who is an author, made the cross-country trip in March after her mother got a bad cold and started losing her faculties. She encountered total disarray: the cable bill hadn't been paid in months, there were stacks of mail and her mom's credit card wasn't working. Where to start? There's a benefit to taking a methodical approach and not trying to do everything at once in a flurry, experts and experienced caregivers say. POWER OF ATTORNEY First, find out who your parent has designated as their power of attorney. If a properly signed and witnessed legal document is already on file, you're ready to go, says Howard Krooks, president of the National Academy of Elder Law Attorneys. This is where advice to those who haven't yet prepared is key - set this up before anything bad happens. There is no age at which it's too soon, Krooks says. "The reality is that a disability can happen to anyone at any time," Krooks says.
If you don't have a power of attorney set up, though, you can get one executed in a day, says Holly Kylen, a retirement coach at ING. You can also get limited access to another person's checking account by going to a bank branch with them, says Jilenne Gunther, senior strategic policy adviser for AARP. For situations where your parent or relative is too incapacitated to participate, you can contact an attorney and start the process to be named a guardian. In the meantime, keep records of bills you pay out of pocket. If the disabled person is married, a spouse can typically access accounts. But, increasingly, married couples have at least a few separate accounts and you'll need paperwork to get into them, says Kylen. What you don't want to do is call up pretending to be the incapacitated person. "It's just going to come back and bite you," says Kylen. BANK ACCOUNTS
Once you get access to accounts, you need to go on a detective hunt. Raab started with her mom's primary bank account statements and made lists of the automatic payments, including a supplemental Medicare policy. But there were other bank accounts, too, along with multiple store credit cards. Raab says she keeps digging and digging - she went through her mail and her desk and now keeps track of most accounts online. One challenge Kylen faced when taking over her mother's accounts was that everywhere she turned, companies kept asking for the original copy of the power of attorney document, and it was just a pure paperwork slog. Her advice? Ask the lawyer who executes the power of attorney agreement to get at least 10 copies. Most families do this forensic work, culling through files paper by paper. But you can hire a caregiving organization to help. For example, LivHome, based in 15 locations nationwide, costs $150 for an initial assessment and then charges by the hour depending on what is needed, says Bunni Dybnis, director of professional services. For additional resources, check out AARP's website (aarp.com/caregiving). The Consumer Financial Protection Bureau has guidelines for managing someone else's money (here).
PHISHING HELP When New York comedian Dan Nainan's mom took ill a couple of years ago and his dad was suffering from dementia, Nainan and his sister had to jump in and take over not just the bills, but also the protection of their accounts. Their dad was so willing to give money to anyone who asked that he got on the radar of scammers, and now gets an endless stream of phishing attacks."There are people who are trying to rip them off day and night," says Nainan, 52. He intercepts his parents' mail, and also reroutes all the phone calls to a Google Voice account. Nainan has over 300 numbers blocked at this point, but more still try every day. If any legitimate callers leave messages, he lets the caregiver know and she dials for his dad. Kylen protected her mother by lowering the credit limit on her credit card. She's also had clients who give an elderly parent a prepaid debit card and deposit only a limited amount each month. PLAN FOR THE LONG HAUL For Lynette Whiteman, a 57-year-old from Toms River, New Jersey, the call came more than two years ago - her father was not breathing well. Two weeks later, he was gone, and her mother was not in a position to take care of anything."My dad was good financially, but he had this account and that account. We had no idea what he had," Whiteman says. It took a full tax year to sort out the accounts, which she dealt with one-by-one, sending death certificates to gain access. Now she manages her mother's daily affairs, while a brother handles the long-term investing. Her advice to people who get that call now is to be patient. "It doesn't all have to be done overnight," Whiteman says. She vows to make caregiving easier for her own children."The one thing I'm going to do for my three boys is make these lists and tell them where they are," says Whiteman. "That's a gift you have to give your kids."