In emailed commentary, John Edwards, global head of BrokerTec at CME Group, noted that US Repo average daily volume (ADV) reached $292 billion, up 4% from April. Total money market fund balances rose again to $5.42 trillion in the last week and the RRP at the Fed is holding around at $2.3 trillion, as market participants continued to manage their exposure to potential impacts from a potential US Treasury debt default.
BrokerTec’s US Treasuries ADV was $105 billion in May, up 14% from April despite CVOL (volatility indexes) increasing less than 1% over the same period to hold at elevated levels. Bond markets remained volatile on expectations of future FOMC decision and trepidation surrounding the debt ceiling with the yield on 2Y note ranging 70bps throughout the month.
In EU repo, Edwards said that May’s focus was again on the central banks, their monetary policy meetings and the continued fight to bring down inflation. The ECB raised their deposit rate on May 4 by 25bp to 3.25%, the Bank of England followed on May 11, raising their base rate 25bp to 4.50%.
Despite market uncertainty over potential future rate increases, volumes across EU Repo remained robust throughout May with Notional ADV €346 billion ($370.2bn).