BrokerTec published figures for July showing that year over year (yoy) US Repo average daily notional value (ADNV) increased 18% to $261 billion ($262 billion in June), European Repo ADNV increased 16% to €344.5 billion ($353 billion), and down from €358 billion in June, and US Treasury ADNV increased 15% to $121.6 billion ($128 billion in June).
In a market commentary, John Edwards, global head of BrokerTec, wrote:
The Fed raised rates by another 75 bps for the second straight month to the new 2.50%-2.25% range. A diminished short base in US Treasuries on the run issues helped to keep GC Repo Rates in a tight 1.56 -1.55 range for most of the month.
July ADV rose slightly to $261 billion while our YTD remained the same at $274 billion.
For the first two weeks of July, European repo volumes softened from their June highs. However, from the week commencing 18 July we saw increased volumes as we approached the ECB’s monetary policy meeting.
The ECB raised their three main interest rates by 50 bps on July 21st in a bid to bring record inflation down to its 2% target over the mid-term, its first rate hike in 11 years, ending 8 years of negative interest rates. The larger than previously signaled rate-hike was based on updated assessments of inflation.
Volumes increased after the Euro rate-increase and we saw ADV notional highs matching those last seen in June. The uncertainty of the scale of future rate-hikes in the eurozone contributed to continuing concentration of cash in the short end, increasing the ADV on EU repo.
Volatility softened in July vs June as BrokerTec’s US Treasuries ADV reached $121.6 billion while growing 15% yoy. The 10-year note yield fell to a low of 2.73% on July 27 and YTD US Treasuries ADV is $138 billion, showing strong growth of +17% YoY.
BrokerTec’s RV Curve ADV of $2.2 billion surpassed 2% of the overall BrokerTec US Treasuries volume for the first time.