BrokerTec published figures for June showing that year over year (yoy), European repo average daily notional value (ADNV) increased 23% to €358 billion, US repo ADNV increased 17% to $262 billion, and US Treasury ADNV increased 16% to $128 billion.
In a market commentary, John Edwards, global head of BrokerTec, wrote:
European repo volumes continued their strong run with notional ADV seeing new highs on successive days throughout June, seeing a weekly record high of €373.9 billion ($390bn) in the week ending June 17.
The ECB decision not to raise rates at its June meeting contributed to the continuing concentration of cash in the short end. The ECB also accelerated work on a new tool to combat unwarranted jumps in Euro-area bond yields as markets strain at the prospect of the first interest-rate increases in more than a decade, with the ECB communicating an intent to raise rates by 0.25% in July.
The Bank of England continued its trend of interest rate hikes with its fifth hike in a row, raising rates from 1% to 1.25% on June 16 and raising their peak inflation forecasts to 11% by the end of 2022. Half year end volatility was noted as the month progressed with multiple European issues trading very special.
The Fed raised rates by a surprise 75 bps instead of 50 on June 15 to the new 1.75%-1.50% range. We saw a lot of cash in the system keeping GC Rates lower than the RRP level of 1.55%. June ADV dipped to $262 billion while our Quarter ADV is $273 billion and YTD $276 billion.
Volatility continued to increase in June, leading to 16% yoy growth in BrokerTec’s US Treasuries with ADV reaching $128 billion. CME Group’s Volatility Indexes (CVOL) reached a new post-pandemic high of 180 as the 10-year note yield reached 3.48% on June 14 before subsequently rallying to 3% at month-end as fears of recession started to outweigh inflation concerns.
BrokerTec’s RV Curve ADV increased to $2.2 billion, up from $1.8 billion in May. RV saw a record $5.3 billion traded on June 23 along with four of our top six volume days since launch.