In September, overall term business stayed at a high level with €240.6 billion compared to last month, writes Eurex Repo’s managing director Frank Gast in a market briefing. Compared to September last year, it strongly increased by 72% across all markets, with the Repo market up by 82.5% and GC Pooling up by around 46%.
The development of average traded volumes is worth highlighting, with GC Pooling volumes almost doubling compared to September 2021 and the Repo market increasing by 74%.
Current market developments with rising interest rates in the Eurozone are attracting more and more market participants to become active again in GC Pooling in short-term transactions, but also in term transactions up to one year and even longer. Several clients are already preparing for year-end. Those activities have even started earlier than last year.
Similar to the July rate hike, it took some time for the repo market to pass on the 75-basis point increase. Unlike in July, however, there was a strong demand for collateral in the first days after the new interest rates came into effect on 14 September (collateral scarcity!), with high-quality government collateral trading around -0.40%.
Bunds are still more expensive than before the rate hike, while GC Pooling has more or less normalized after a few days and is trading slightly below the €STR (ECB basket). The average daily trading volume in Bunds increased by 18% compared to the previous month, mainly driven by year-end preparations of several clients.
Finally, in Supranationals and Agencies, trading volumes increased by 40% compared to August, driven by a strong increase in ESM trading volumes.