A strange thing is happening in money markets: the cost of borrowing unsecured wholesale funds is now below the cost of borrowing secured funds.
The problem, according to repo dealers, is that new leverage ratio rules are set to make it far too costly for repo market participants to transact.
Meanwhile in the world of swap spreads, as Bloomberg’s Tracy Alloway has been noting, rates have plummeted to historic negative lows which defy market logic. Read more
According to the latest bi-annual European repo survey by ICMA, released on Wednesday, the market for repo in Europe shrunk to €5.5tn in December 2013 from €6tn in June 2013 — a sharp decline by any means.
As the ICMA press release notes: Read more
1. Take as much collateral as possible and park it at the ECB.
2. Watch as market bifurcates around quality/inferior collateral.
3. Disregard spikes in settlement fails. Read more
We all know the story in the public repo market. The European Central Bank has provided three years worth of funding against the widest range of collateral it has ever dared to accept, and is preparing to do it all again in February. We know the type of collateral it accepted, and how much funding it provided.
But what, pray tell, is the story in the private interbank repo market? Read more
A timely paper from the International Capital Markets Association has just hit our inbox.
The title: “ICMA SOVEREIGN BOND CONSULTATION.” Read more
As we’ve already noted, the International Capital Market Association (ICMA)’s September survey of the European repo market has a wealth of interesting data and statistics.
Here’s one we found particularly telling, though: Read more
The International Capital Market Association’s latest review of the European repo market is out, and there are some interesting findings to say the least.
Chief amongst them is the fact that European repo markets have recovered almost fully from their Lehman crisis setback, notching up a baseline market size of about €6,979bn — an increase of 25 per cent on the previous survey, conducted in December 2009. Read more