In September 2007 the ECP market contracted by $42 billion, in October the ECP market expanded by $41 billion and in the first three weeks of November the ECP market again contracted by $41 billion.
This week the market contracted by $23 billion, the largest weekly contraction registered so far. Holidays in the US and Japan ensured that volumes were low. A lack of positive news did the rest.
SPVs this week contracted by $18.7 billion. However, contractions did not come from this beleaguered sector alone. Sovereign type borrowers also reduced their outstanding numbers, in particular KFW and the Republic of Austria issued much less then they had maturing in the market. In total the sovereign sector reduced their outstanding amounts by $19.7 billion. It is thought that this is driven by a need to reduce balances before the end of 2007.
The difference this month is that banks are no longer picking up the shortfall in funding. In September banks managed to make up the $56 billion contraction from SPVs by expanding $30 billion. In October banks expanded $47 billion to make up $22 billion of contractions from SPVs. However, in November Banks are continuing to contract. For the first 3 weeks of November their contraction stands at $6 billion. It is expected that by the end of this month this number will be much bigger.