Despite the turbulent month of March, which saw the collapse of Silicon Valley Bank and Signature Bank, and the beginning of the Easter holiday season in April, during which trading volumes have traditionally been lower, Eurex Repo saw another increase in trading activity in the GC Pooling and Repo markets, writes Frank Gast, managing director and Member of the Management Board at Eurex Repo.
Eurex Repo’s average term-adjusted volume increased by 76.5% from €203.5 billion to €359 billion compared to April 2022, and the average traded volume increased by 110.4%.
Volumes were highlighted by a sharp increase of 330% in average daily traded volume to €39.1 billion for GC Pooling compared to April 2022. Since the beginning of the year, this strong increase in average daily traded GC Pooling volumes has been driven by an increasing number of active clients trading in GC Pooling. In addition, DMOs [debt management offices] and other sovereign institutions prepared themselves for 01 May 2023 (change in [European Central Bank]’s remuneration policy for government/sovereign deposits to a ceiling of €STR -20 bps), which also led to increased trading activity in GC Pooling.
With the increasing trading volume and more active trading members than 12 months ago, the Eurex Repo team also saw a spread widening in short-term trading activity of up to 10bps between the EUR ECB and EUR EXT basket.
Term business especially increased in 1-month terms while there was also saw some good business in 9 and 12 months. Average daily term-adjusted volume increased by 80.4% to €112.9 billion, compared to €62.6 billion 12 months ago.
The Repo market continued its strong growth in April for GC and Special with a 50.7% increase in average daily term-adjusted volume compared to the previous year and an increase of 35.7% in average daily traded volume compared to April 2022.
This was led again by increased trading activities, especially in German Government bonds (+56% increase YTD), as well as Spanish and Italian Government bonds. There was huge interest in the new ECB period, 10 May to 21 June 2023.
In addition, the team saw an increase in activities in EU bonds, where the traded volume increased by 38% since the beginning of the year. This also supported the overall growth in Supranationals and Agencies, with an increase of 28% YTD.
Overall, Eurex Repo saw a significant increase in trading volumes in April across all markets, continuing the strong start to 2023. The YTD comparison for the first four months also showed an overall increase in term-adjusted (+60.5%), outstanding (+59%), and traded (117.6%) volume across all markets.