ICMA ERCC European repo market survey shows market acting as ‘shock absorber’
14 October 2026 Europe
Image: Dilok/stock.adobe.com
The H1 2026 survey from the International Capital Market Association (ICMA) European Repo and Collateral Council (ERCC) has shown that investors sold off longer-term government bonds and moved to the short end of the money market, stemming from the outbreak of conflict between the US and Iran.
The war in the Gulf prompted the market to revise its expectations about the future path of central bank interest rates, which had been anticipated to ease prior to the conflict, and was reflected in floating-rate repo positions retaining an elevated share of books of the survey.
The war also caused a general repricing of risk, evident in higher haircuts on triparty repo collateral, except for sovereign, supranational, and agency issues and covered bonds.
ICMA notes that the average credit rating of triparty collateral moved lower, predominantly caused by rating downgrades on Belgian and French government bonds.
However, ICMA says that 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 rates.
The repo market also supported the distribution of a large amount of new government issuance, with G7 gross issuance potentially as high as US$20 trillion.
According to ICMA, the outstanding value of the repo books surveyed as of the latest date had been pushed up in value to €14.916 trillion, up 9.3 per cent over the semester and 19.9 per cent year-on-year.
US Treasuries have remained the largest component of the survey sample’s collateral holdings, but the overall focus of market activity has shifted to European government bonds, with core eurozone and Spanish government bonds gaining share.
The UK gilt market was an outlier to this trend, as deleveraging by hedge funds reduced the need for repo funding until the end of H1, and UK banks utilised the Bank of England’s Short-Term Repo Facility to fund carry trade in high-yielding gilts.
ICMA says that volatile market conditions moved some repo activity growth away from automatic trading systems (ATS) into voice brokers.
There was “vigorous growth” in central clearing, which ICMA says is unusual, as typically ATS trading and central clearing are “intimately linked”.
Automated trading systems — such as Tradeweb and GLMX — also saw growth, as hedge funds deleveraged in response to market volatility.
The war in the Gulf prompted the market to revise its expectations about the future path of central bank interest rates, which had been anticipated to ease prior to the conflict, and was reflected in floating-rate repo positions retaining an elevated share of books of the survey.
The war also caused a general repricing of risk, evident in higher haircuts on triparty repo collateral, except for sovereign, supranational, and agency issues and covered bonds.
ICMA notes that the average credit rating of triparty collateral moved lower, predominantly caused by rating downgrades on Belgian and French government bonds.
However, ICMA says that 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 rates.
The repo market also supported the distribution of a large amount of new government issuance, with G7 gross issuance potentially as high as US$20 trillion.
According to ICMA, the outstanding value of the repo books surveyed as of the latest date had been pushed up in value to €14.916 trillion, up 9.3 per cent over the semester and 19.9 per cent year-on-year.
US Treasuries have remained the largest component of the survey sample’s collateral holdings, but the overall focus of market activity has shifted to European government bonds, with core eurozone and Spanish government bonds gaining share.
The UK gilt market was an outlier to this trend, as deleveraging by hedge funds reduced the need for repo funding until the end of H1, and UK banks utilised the Bank of England’s Short-Term Repo Facility to fund carry trade in high-yielding gilts.
ICMA says that volatile market conditions moved some repo activity growth away from automatic trading systems (ATS) into voice brokers.
There was “vigorous growth” in central clearing, which ICMA says is unusual, as typically ATS trading and central clearing are “intimately linked”.
Automated trading systems — such as Tradeweb and GLMX — also saw growth, as hedge funds deleveraged in response to market volatility.
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