NEX Markets reported a 15% increase in European repo volumes to €260.4 billion in May year-on-year and a slight increase of 2% increase month-on-month. US repo was up 6% to $229.2 billion but shed 2% month-on-month.
NEX Markets Volumes – June 2018
| Average daily volume (in USD billions unless otherwise stated, single count) | ||||||||
| June | YoY% change | May | MoM% change | 12 Months ended 30 June | % change | |||
| 2017 | 2018 | 2018 | 2017 | 2018 | ||||
| US Treasury | 166.1 | 156.6 | (6%) | 178.2 | (12%) | 166.7 | 166.7 | 0% |
| US Repo | 226.5 | 230.1 | 2% | 229.2 | 0% | 222.3 | 243.8 | 10% |
| European Repo (in EUR billions) | 220.2 | 269.7 | 22% | 260.4 | 4% | 198.1 | 247.5 | 25% |
| Spot FX | 83.3 | 95.8 | 15% | 101.3 | (5%) | 82.6 | 89.7 | 9% |
Volume information includes UST Benchmarks and Agencies. Off-the-Run securities, including T-Bills, are provided pursuant to an agreement with ICAP Securities USA LLC.
US Repo
The US repo market remains mired in a period of low specials and general collateral (GC) volatility, a trend which began in earnest in early April. The main culprit is oversupply of collateral and the failure of the UST market to establish a consistent short base. More supply is expected in Q3 to the tune of about 250 billion in additional bonds, notes and bills, so it may take some time for the Street to digest all the supply and we could certainly see a continuation, if not an acceleration of the recent trend.
GC/general collateral financing trades (GCF) volumes are becoming a bigger percentage of the Fixed Income Clearing Corporation (FICC) market. Reg trading in GC and specials continues to edge higher as firms focus on meeting their Capped Contingency Liquidity Facility (CCLF) obligations. Also, average daily volume (ADV) at FICC moved back above 600 in June for the first time in a couple of months.
EU Repo
BrokerTec ADV for June was €269 billion vs €260 billion in May, equaling our best ever month set in February 2018. We also saw a record high in terms of trades, with an average of 10,300 per day over the course of the month. Additionally, Term Repo remained strong with ADV of €288 billion in May and saw active trading across most Eurozone markets in the 1week to 1month predominantly.
Half Year End was fairly calm, with rates remaining under control. German and French GC were only a few ticks more expensive than on an average, normal day, showing liquidity was adequate for the market demand. BrokerTec saw many traders preparing well in advance, with Corporate – 2nd July Repo term trading featuring heavily throughout the early stages of the month.
There was a little unease before the three major central banks set rates ahead of the European Central Bank (ECB) meeting on the 14th June, however all major rates were left unchanged. Quantitative Easing dropped from €30 billion to €15 billion per month for October through December and will finish at the end of this year. The Bank of England held their meeting on the 21st June where rates were also unchanged as expected, however the vote was 6-3 with their Chief Economist, Andy Haldane, throwing his support behind an immediate increase. The pound rose on the back of the news that there had been a split, as this is first time Haldane has dissented since joining in 2014.