ICMA survey shows the European repo market acting as systemic shock-absorber in H1 2026
ICMA's European Repo Market Survey: Celebrating 25 years
13 October 2026 Amid the macro-economic uncertainty and financial market turbulence unleashed by the outbreak of hostilities between the US and Iran at the end of February, investors sold off longer-term government bonds and fled to the very short end of the money market in search of a safe harbour. Nevertheless, the repo market performed its function of systemic stabiliser by balancing the supply of and demand for short-term funding and liquidity with very little volatility in repo rates, while at the same time supporting the distribution of huge amounts of new issuance by governments (gross issuance by the G-7 in H1 could have been as much as USD 20 trillion). By the date of the latest survey, these factors had helped to push the outstanding value of the repo books of the survey sample to a record EUR 14,916 billion, up 9.3% over the semester and 19.9% year-on-year.
Download the 51st ICMA ERCC European Repo Market Survey
Despite the huge flows across and between financial markets, the capacity of the repo market proved robust. There was also little fallout from tighter conditions in the credit and equity financing markets in the wake of massive new issuance, not least by AI firms. Matters were helped by the prompt and orderly manner in which hedge funds unwound their yield curve and basis trades, and the reassurance offered by access to central bank liquidity facilities.
Summary of key findings:
US Treasuries remained the largest component of the collateral holdings of the survey sample but, in contrast to the previous semester, the focus of activity in the repo market moved to European government bonds, with core eurozone and Spanish government bonds gaining share, but that of Italian government issues contracting (as new issuance was reduced). The switch in attention to Europe may have reflected its greater exposure to the oil shock from the war in the Gulf.
The UK gilt market was an outlier, as deleveraging by hedge funds reduced the need for repo funding until the end of the half-year. In addition, banks in the UK tapped the Bank of England's Short-Term Repo Facility to fund carry trades in high-yielding gilts.
Volatile market conditions pushed some of the growth in repo activity away from automatic trading systems (ATS) into voice-brokers, whose market share has been recovering since 2022, after an almost continuous decline since the survey started in 2001. Among other things, voice-brokers can instantly expand the market coverage of dealers' repo desks when volumes surge and are able to use their network of relationships to search for liquidity and scarce securities with less information leakage than is possible in the more transparent screen-based market segments.
However, despite a fall in the share (but not the value) of ATS-traded repo, there was vigorous growth in central-clearing, which was unusual, given that ATS-trading and central-clearing are usually intimately linked. The reasons for this divergence may include the growth of indemnified client-clearing services (aimed at hedge funds) which are being offered by LCH RepoClear and ECAG.
Automated trading systems (Tradeweb and GLMX), which are principally used for dealer-to-client repo, also saw slower growth, as hedge funds (their prime users) deleveraged in response to market volatility.
The inflationary concerns generated by the war in the Gulf prompted the market to revise its expectations about the future path of central bank interest rates (which had been expected to ease prior to the war in the Gulf). This was reflected in floating-rate repo positions retaining an elevated share of the repo books of the survey sample.
The general repricing of risk that followed the outbreak of hostilities was evident in higher haircuts on tri-party repo collateral, with the exception of SSA issues and covered bonds. The average credit rating of tri-party collateral moved lower, mainly due to rating downgrades on Belgian and French government bonds.
25 years of the ERCC survey
In November, ICMA will be celebrating the 25th anniversary of the repo survey with the publication of a report reviewing the growth and development of the European repo markets over that period.
