In an emailed update, Eurex Repo’s managing director Frank Gast wrote that December 2021 saw sustained elevated repo market volumes. This was mainly due to term trading activities over year-end and forward starting trades from 3 January to 20 and 21 January, particularly in German and French government bonds. Banks sourcing collateral amid concerns about potential scarcity at year-end fueled the volumes, which had begun in October and only started to subside from 22 December onwards.
In terms of repo rates, Eurex Repo saw actual rates approach -5% for Bunds and down to -6.25% for other Euro govts over the turn of the year. These rates were not as negative as implied repo rates of -8 to -9% a few weeks earlier had indicated. Year-end passed in an orderly fashion with more than adequate collateral supply to be sourced at Eurex.
Average daily traded volumes in the repo market segment in December were 26.4% higher than in December 2020 and the average outstanding volume was 71% higher than Dec 2020. In fact, outstanding volume in the repo market exceeded €100 billion ($114bn) on several days in December for the first time.
Overall daily average outstanding volume on Eurex Repo, including GC Pooling, rose from €88.4 to €132.2 billion in December 2021, a dramatic increase of 49.5% compared to the previous year.
GC Pooling average daily term volume decreased by 26% compared to Dec 2020 to €26.7 billion. It remained absolutely flat when comparing Q4 2021 with 2020 as ECB monetary policy continues to becalm wholesale funding markets. GC Pooling traded as negative as -2.5% in the ECB basket over year-end.
In EU Bonds, Eurex Repo’s team continues to see an increase in the number of participants quoting. The total traded volume of EU bonds decreased in December by 24% after the very strong increase seen in November (+100%). However, the overall volume trend is upward and EU bonds accounted for above 40% of traded volumes in supranationals and agencies at Eurex Repo.