ICMA’s European Repo and Collateral Council (ERCC) has released the results of its 45th semi-annual survey of the European repo market.
The survey measures and analyses the value of outstanding repo plus reverse repo on the books of 62 participants before 14 June 2023. This excludes monetary policy repos with central banks and is not adjusted for double counting.
The total size of the survey grew 11.5 per cent year-on-year to a record €10,794 billion, with the sample representing the minimum size of the European market.
This was driven by the flow of new cash into repo, higher interest rates and steeper yield curves in the money market, and the protection given by repo against credit and liquidity risk.
However, the ERCC has recorded signs of survey growth decelerating. In net terms, the survey sample cut back its long-standing cash lending/securities borrowing position, reflecting the quantitative tightening driven shift away from the trading of specific and special collateral.
Floating-rate repo continued to gain share in the rising interest rate environment while tri-party repo rallied on the back of the recovery in general collateral repo.
The survey shows that 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.
Other key findings include how the unwinding of European Central Bank support forced peripheral eurozone banks back into the repo market, boosting use of Italian and Spanish collateral.
Meanwhile, the share of sterling repo contracted, possibly reflecting a shrinking short base as economic conditions in the UK stabilised.
