Reversal in dollar funding stress indicator is likely just a "small correction," says Charles St-Arnaud at Nomura. The three-month euro dollar cross currency basis swap has tightened steadily this month, touching -16.7bps on Fri, but widening to -19.2 bps on Mon. The swap may stabilize at this level, he said, noting the current level is where the swap was in the spring of 2011. The ECB's measures have helped tighten this swap, with the central bank's first announcement on extending cheap loans to euro zone banks in Nov helping pull it back from wides of -165 bps.
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