The European repo market – ICMA survey shows new record outstanding value of EUR 10,794 billion at June 2023
20 December 2023 ICMA’s European Repo and Collateral Council (ERCC) has today released the results of its 45th semi-annual survey of the European repo market.
The survey measured and analysed the value of outstanding repo plus reverse repo on the books of 62 participants at close of business on 14 June 2023, excluding monetary policy repos with central banks, and it was not adjusted for double-counting. Given that the ICMA surveys a sample of the European repo market, the headline number must be taken as the minimum size of the European market. The ICMA survey is about 50% of the size of the size of market given by UK and EU SFTR public data.
Download the 45th ICMA ERCC European Repo Market Survey
The total size of the survey grew 11.5% year-on-year to a record EUR 10,794 billion, continuing the uptrend launched in 2016 by the ECB’s Enhanced Asset Purchase Programme (EAPP) and the market’s assimilation of post-GFC Basel regulations on capital, leverage and liquidity.
The growth of the survey was driven by the flow of new cash into repo, attracted by higher interest rates and steeper yield curves in the money market and the protection given by repo against credit and liquidity risk. However, there are signs of survey growth decelerating.
Summary of key findings:
- In net terms, the survey sample cut back its long-standing cash lending/securities borrowing position, reflecting the QT-driven shift away from the trading of specific and special collateral.
- Floating-rate repo continued to gain share in the rising interest rate environment.
- Tri-party repo rallied on the back of the recovery in GC repo (of which it is a sub-set). The share of voice-brokers also rallied.
- Despite a strong inflow of government bonds, their share in the pool of European collateral fell as the use of non-government securities rose at a faster rate, in particular for covered bonds that could formerly be financed on the ECB’s TLTRO facility.
- The share of French government bonds used as collateral overtook that of German government bonds as benign market conditions dampened demand for what has been the preferred safe asset for investors.
- The unwinding of ECB support forced peripheral eurozone banks back into the repo market, boosting use of Italian and Spanish collateral.
- The share of sterling repo contracted, possibly reflecting a shrinking short base as economic and monetary conditions in the UK stabilised.
- There was a seasonal contraction in term-to-maturity and forwards fell back but remain significant.
- The survey sample ran an even more negative funding gap, that is, borrowing short-term and lending long-term.