ASIFMA and ICMA have released an APAC (ex-Japan ) survey, reporting $310.9 billion in outstanding value of repos and reverse repos and an average daily turnover of $43 billion, compared with $260.1 billion (+19.5%) and $29 billion per day (+48.3%) in 2021. Average deal size fell to $47 million from $56 million in 2021.
Using similar methodology to the established ICMA ERCC European repo market survey, the latest Asia-Pacific survey reports the outstanding value of repos and reverse repo as at June 8, 2022 and offers a detailed breakdown of those positions. Whereas normally the Asian survey differs from the European survey in that it is split into two parallel surveys, one for trading in Japan and the other for trading elsewhere in the APAC region, this survey focuses entirely on the APAC non-Japan region.
“Since 2016 this survey has offered a valuable source of information on the state of the cross- border repo markets of Asia-Pacific,” said ICMA chief executive Bryan Pascoe. “As we recover from the pandemic, we hope that work such as this will continue to benefit our members, authorities and regulators and other market participants in the region.”
“The ASIFMA/ICMA survey shows the growing importance of repo across the region and the dynamics of its structure and stakeholders,” added Philippe Dirckx, managing director and head of Fixed Income at ASIFMA. “It is also encouraging to see the regulatory changes supporting its development aligned with our members’ expectations and requirements. There nevertheless remain impediments limiting cross-border repo to fully leverage the liquidity of the on-shore market. This is one of the key areas of focus when we engage with the relevant regulators and market infrastructures.”
Survey findings
- The bulk of business in the ex-Japan APAC repo market continued to be directly negotiated but voice-brokers and, to a lesser extent, automatic electronic trading systems increased their share.
- Cross-border business between the APAC region and Europe lost ground to domestic and cross-border business within APAC. • Changes in the geography of business were reflected in major shifts in shares away from counterparties in Europe, the US and major Asian markets to “other APAC” and Australian counterparties.
- The share of CCP-cleared repos jumped to 16.5% from 1.6% in 2021
- The US dollar remained the dominant currency in the APAC repo business measured by the survey but the Japanese yen took a much increased share, largely at the expense of the euro. The Australian dollar continued to be a significant component.
- Reflecting the changes in the geography of the survey, there were also major shifts in shares away from European securities and, to a lesser extent, US Treasuries, in favor of Japanese securities and international bonds (eurobonds).
- Government securities became the largest class of collateral.
- US Treasuries and Australian securities remained significant sources of collateral but much larger shares for Japanese securities and international bonds squeezed European securities.
- There was a sharp increase in the share of short-dates but much reduced activity in forward and open repos.
- Transactions overwhelmingly remained in the form of repurchase transactions but undocumented buy/sell-backs reappeared.
- Reflecting the scale of use of repurchase transactions, most reported transactions continued to be documented under the GMRA.
