Frank Gast, managing director and member of the Management Board of Eurex Repo, wrote that the positive trend of rising volumes at the venue continued in November, with an increase of 83.5% in average traded volumes across all markets compared to November 2021.
“We saw a massive increase of 140% in GC Pooling due to the changing market environment with the first TLTRO repayments and higher interest rates. The repo market increased by 61%, driven by a 90% increase in Special Repo due to higher demand for HQLA and year-end funding activity.
“Bund Special repo volumes more than doubled compared to November last year. On the collateral scarcity side, the situation has eased and the spread for short-dated trades in Bund Special repo against €STR declined to 30 basis points by mid-November. In GC Spanish 5 and 10 Year, government GC baskets also traded heavily with maturing trades by the end of December and over year-end. Term business increased by 34% in the Repo Market with continued trading in Euro government bonds over year-end and forward starting repos from December to March, particularly in German and French government bonds, around future expiry dates.
“In SSA [sovereigns, supranationals and agencies], volumes increased by 48% compared to October, mainly due to higher activity in GC (+83%) on the back of higher demand for financing transactions. In EU bonds, traded volumes reached another record high, up 36% compared to October.
Finally, for managing LCR requirements, some clients have traded Spot Open LCR30d for the first time in the Repo market. Given the changes in market conditions, we expect open term repos to be more broadly traded in 2023.”