ICMA (International Capital Markets Association) report released yesterday showed massive 9.5% contraction in euro area repo markets, leading to lower availability of short-term funding to banks in the market over H2 2013 compared to H1. The core drivers of the decline are
At the same time, the share of anonymous electronic trading jumped unexpectedly to 25% from 19.8% a year ago. This came at the expense of domestic business (down to 26.1% from 29.7% a year ago) and less significantly at the expense of cross-border transactions within the euro area (down to 18% from 18.9% a year ago). The survey suggested that ECB's funding sources are the driver behind these trends in relation to domestic repos.
Summary table:
Net conclusion: things are not running smoothly in the funding markets, some five years since the crisis trough.
Full report here: http://www.icmagroup.org/media/Press-releases/
- ECB's supply of funds met by lenders who are becoming more reliant on Central Bank's funding, and
- Cash hoarding by banks.
Here is a summary table showing H2 2013 repo market at the lowest point of any half-year period since H1 2009 and the third lowest reading since H1 2005.
Summary table:
Net conclusion: things are not running smoothly in the funding markets, some five years since the crisis trough.
Full report here: http://www.icmagroup.org/media/Press-releases/
