May was another month of strong volume development at Eurex Repo, with continued growth in both GC Pooling and the Repo Market. This culminated in a new overall record in total outstanding volume reached on 30 May, writes Frank Gast in a market briefing.
Eurex Repo’s average term-adjusted volume increased by 100.5% compared to May 2022, with an increase of 142% recorded in GC Pooling and 73.9% seen in the Repo Market segment. Comparing May 2023 with April 2023, the daily average term-adjusted volume grew by 10%. The increase was primarily provided by the GC Pooling market, with our Repo Market segment almost flat compared to April.
Overall, Eurex Repo saw a significant increase in volume metrics across all markets, continuing the very strong start to 2023. The year-to-date (YTD) comparison for the first four months showed an overall increase in term-adjusted (+69.2%), outstanding (+60.8%), and traded (111.9%) volume across all markets. GC Pooling is leading the daily traded YTD volume increase with a huge 321% rise compared to Jan – May 2022.
GC Pooling volumes in May showed sharp term growth from one week to one month in the ECB and EXT ECB baskets, whereas one-day term volumes saw a small reduction compared to April. In the ECB basket, longer term trading was much stronger with standard terms of 3,6, 9 and 12 months commonly seen with a wide variety of market participants contributing.
DMOs and other sovereign institutions managed the 1 May change in ECB’s remuneration policy for government/sovereign deposits to a ceiling of €STR -20 bps which assisted increased liquidity in GC Pooling. In Overnight Trading, GC Pooling typically saw a spread between the ECB and EXT ECB baskets of around 8 to 10 bps, with the ECB basket often trading around ESTR minus 4 or 5 bps, while the EXT ECB basket usually traded above ESTR.
The INT MXQ GC Pooling basket saw sustained interest during May, with the outstanding volume at the end of the month 71% higher than at the end of April.
The Repo market sustained the growth seen throughout the year with the continuing increase in Specials volume still primarily driven by German government bond repo (+30% traded volume increase YTD), as well as notable growth in French, Spanish and Italian Government bonds as banks seek netting opportunities. Outstanding volume in these markets has risen YTD by 47% (French), 27% (Spanish) and 227% (Italian). Semi-core Euro govt bond repo also saw a notable increase in volume, albeit from a lower level.
The rise in SSA (sovereign, supranational and agency) bond trading, particularly in GC format, is particularly interesting. We saw consistent trading in one-month terms and out to 21 June. EU bonds saw great demand for trading, with a new monthly traded volume record of EUR 27.2 billion, more than double the previous high point reached in November 2022. This supported an overall increase in Supranationals and Agencies as a whole, with traded volume almost doubling compared to April (+98%).
The general uptick in SSA trading helped Open repo traded volumes, with SSA’s responsible for 56% of all Open repo during 2023.