Asia Pacific counterparties accounted for 5.3 percent of total outstanding repos and reverse repos reported by European dealers compared with 3.9 percent in December 2016, according to the latest trade association survey.
ICMA’s European Repo and Collateral Council (ERCC) and ASIFMA’s Secured Funding Markets Committee have been cooperating to extend the ICMA’s semi-annual survey of the European repo market to the Asian market.
The report, based on data from June, shows that financial links across the two regions are getting stronger, with cash flows and cross-border activities increasing since the pilot survey was conducted in December 2016.
The new data about Asian repo in the European survey identified Asian repo accounts for a small, although not an insignificant share of the European market. The European market is a net borrower of collateral from Asia.
Asian currencies accounted for 6.7 percent of total outstanding repos and reverse repos traded in Europe compared to 5.3 percent in the first survey.
Japanese yen accounted for 5.7 percent of this figure up from 4.8 percent. About 60 percent of transactions in yen were reverse repos but 50 percent in other Asian currencies, meaning European dealers overall were net lenders of yen but were matched in other Asian currencies.
The overall share of Asian collateral repoed out or reversed repoed in by European dealers was 8 percent compared with 5.5 percent in 2016. Of this, Japanese collateral accounted for 6.4 percent and Japanese government bonds for 4.8 percent (compared with 4.3 percent and 2.8 percent, respectively).
Of the total collateral, 0.6 percent was issued in other Organisation for Economic Co-operation and Development (OECD) APAC countries; 0.6 percent was non-OECD APAC collateral; and 0.4 percent was APAC eurobonds (compared with 0.5 percent, 0.4 percent and 0.3 percent, respectively, in December 2016).
The trade bodies also ran two further surveys simultaneously that focused solely on Japan and APAC (excluding Japan) repo markets.
The results highlight that for reporting banks outside Japan, most of their counterparties were located in Europe and other regions outside Asia (probably the US) and the bulk of reported repo business outside Japan was cross-border.
The Japan survey reported an outstanding value on 10 June of $215.7 billion, an average daily turnover over the previous six months of $192.4 billion, with an average deal size of about $260 million.
Central counterparty (CCP) activity accounted for most of the Japan survey but little of the other APAC survey.
Unsurprisingly, the Japanese yen predominated in the Japan survey, with the remaining business mainly in US dollars, euros and Australian dollars. While the yen was important, the predominant currency was the US dollar, with significant business also in Australian dollars and euros.
The APAC survey reported $216.7 billion in outstanding value and average daily turnover was $73.1 billion, with an average deal size of some $71 million.
The CCP analysis identified that the bulk of the business reported in the other APAC survey was with Asian counterparties, 42.4 percent of outstanding value, mainly in Hong Kong (16.6 percent) and Singapore (10.6 percent) but also in China (5.8 percent).
