We’ve created a round-up of February 2024 monthly results from across repo, securities lending and securities finance-related markets published throughout March. This month we feature figures from BrokerTec, Clearstream, DTCC, Eurex Repo, Hazeltree, London Reporting House, MTS Repo, Options Clearing Corporation, S&P Global Market Intelligence, and Tradeweb.
Repo results
Eurex Repo recorded a 16% year-on-year (yoy) increase in daily GC Pooling volumes to €129.3 billion ($139.5bn) in February, which is flat when compared to January figures. Additionally, the overall average daily term-adjusted repo volume demonstrated growth of 7% in February, amounting to €346.8 billion, also up from January’s €338.9 billion.
In market commentary, Frank Gast, managing director and member of the Management Board, wrote: “February 2024 demonstrated a consistent upward trend, with the average daily term-adjusted volume year-to-date across all Eurex Repo markets increasing by 19% compared to previous years, totaling €344 billion. This notable growth was largely driven by a 34% increase in GC Pooling and a 12% rise in the repo market.”
The average short-term rates in GC Pooling demonstrated stability, maintaining a spread of 1.5-3 (avg 1.74) basis points between the ECB and EXT ECB baskets overnight. This consistency was positively reflected across various terms up to one month, indicating a well-balanced and steady market condition. Notably, there was a lesser drop in the ECB GC Pooling basket overnight repo rate compared to the end of January, indicating resilience in the market.
The deferred funding rate continued to tighten, averaging -2.5 basis points against the ECB’s deposit rate, reflecting the trend of high-quality collateral becoming cheaper. Additionally, Bund Specials repos continued to cheapen against the GC Pooling ECB basket, with the average spread narrowing from -25 bps in January to -9 bps in February.
| Repo: Average daily term-adjusted volume on Eurex Repo | February 2024 | February 2023 | Change |
| GC Pooling (billion €) | 129.3 | 111.9 | +16% |
| Repo Market (billion €) | 217.5 | 212.2 | +3% |
| Total (billion €) | 346.8 | 324.0 | +7% |
Short-term liquidity in EUR GC Pooling showed a positive increase compared to January, indicating improved market conditions. For terms ranging from one week to one month, liquidity remained dynamic with a slight upward curve, reflecting subtle market adjustments.
Notably, GC Pooling saw significant activity in standard terms exceeding nine months, particularly within the ECB Basket. This highlights growing investor interest in longer-term investments, further emphasized by the upward shift in the nine-month ECB basket average traded rate towards month-end, signaling positive market momentum.
In EU Bonds and SSAs [sovereigns, supranationals, agencies] traded volumes remained relatively stable, with a 35% increase in KfW bonds, while EU bonds experienced a slight decline compared to January. Bund Specials saw a decline in year-to-date trading volumes due to the recent cheapening trend of Bunds. However, February trading recovered, with daily volumes 14% higher compared to January.
In other government bonds, the positive trend of higher trading volumes continued particularly French government bonds. Increased quoting activity resulted in a 31% jump in trading volumes compared to January. Significant activity was also noticed in peripheral governments (specifically Italian government bonds), which experienced a remarkable +147% increase compared to January.
“This activity was particularly evident in the GC repo format and for terms ranging from one week to three months, indicating broad market participation and interest in different maturities,” Gast wrote. “Furthermore, the number of repo transactions executed saw a significant rise in February. This was driven by increased activity in core and semi-core EUR government bonds executed via the order book.”
At Clearstream, global securities financing outstanding volumes were up 33% in February yoy to €732.6 billion, also up from January’s €707.8 billion.
| Global Securities Financing (GSF) | ||||||
| Volume outstanding (€ bn) |
732.6
February 2024 |
550.6
February 2023 |
33%
Change |
720.2
YTD |
546.5
YTD 2023 |
32%
Change |
In Tradeweb’s money markets segment, repurchase agreement ADV was up 33.8% yoy to $550.3 billion, down from January’s $546.2 billion.
“Increased client engagement with Tradeweb’s electronic repo trading protocols drove record global repo activity. The combination of quantitative tightening, heightened collateral supply, and current rates market activity shifted more balances from the Federal Reserve’s reverse repo facility to money markets. Retail money markets activity was strong as interest rates remained elevated and market expectations for rate cuts moved further into 2024,” according to a company statement.
At CME Group, BrokerTec US repo average daily notional value (ADNV) increased 2% to $298.6 billion in February, also up 4% versus January, reaching its third highest month ever. In emailed commentary, John Edwards, global head of BrokerTec, wrote: “Repo activity ramped up with the quarterly refunding on 15 February, with changing expectations for the timing for rate cuts also driving volumes.”
Volumes for EU Repo remained steady for the first few weeks of February, with a substantial increase in daily volumes in the final week of the month. This resulted in an ADV for February of €276 billion, down from €358 billion yoy and up 1% compared to January.
Euronext’s European repo trading platform MTS showed term adjusted ADV up 15% in February at €478.5 billion, also up 6% from the previous month’s €452 billion.
MTS repo transaction value € million, single counted
| Feb-24 | Jan-24 | Change % MOM |
Feb-23 | Change % YOY |
YTD 2024 | YTD 2023 | Change % YTD |
|
| MTS | ||||||||
| ADV MTS Cash | 36,859 | 32,283 | 14% | 23,505 | 57% | 34,518 | 21,307 | 62% |
| ADV MTS repo | 166,840 | 167,828 | -1% | 167,126 | 0% | 167,346 | 162,262 | 3% |
| TAADV** MTS Repo | 478,452 | 451,909 | 6% | 415,979 | 15% | 464,872 | 401,286 | 16% |
According to London Reporting House data, which uses Securities Financing Transactions Regulation (SFTR) submissions, the average daily turnover of repos in the EU market over 2023 grew +8% versus 2022 to reach €2,432 billion, while the number of trades increased by +10% to over 90,000 per day (so average deal size contracted).
Turnover was slow to recover after the 2022 end-year break. It then trended sideways for the rest of year, albeit at a higher level than in 2022, but fluctuating widely, with peaks around futures delivery and deep troughs at Easter, around May Day and again at end-year, wrote Richard Comotto, LRH co-founder and chief product officer.
Although turnover in new CCP-cleared repos grew by +0.7% in 2023 versus 2022, CCP-clearing lagged behind the rest of the market, as a result of which, its share fell to 56.5% from 60.4%. The loss in share was concentrated in H2 after a spike around the June futures delivery date (turnover fell to 54.5% in H2 from 58.5% in H1).
In contrast, the share of outstanding CCP-cleared repos jumped +13.4% to 47.5% in 2023 from 41.1% in 2022, following a sudden surge in cleared repos at the end of 2022 and despite the outstanding value of all repos racing ahead of CCP-cleared repos in Q3 2023.
“The implication is that the average duration of CCP-cleared repo increased in 2023. There is anecdotal evidence from one electronic platform in particular to support the idea of longer terms in CCP-cleared repo,” Comotto wrote.
DTCC reported that FICC Treasury clearing volumes grew 31% yoy, representing $7 trillion in daily average activity. FICC sponsored service also grew, with buy-side volumes up 74% at $938 billion and the number of sponsored member firms participating in FICC up 60% to 2,414 firms that represent a diverse set of asset managers of different profiles and regulated statuses.
Laura Klimpel, managing director and head of Fixed Income and Financing Solutions, said in a company statement “FICC provides certainty and stability to the Treasury market while enabling firms to maximize liquidity, take advantage of netting and generate balance sheet relief.”
Securities lending stats
At the Options Clearing Corporation (OCC), securities lending ADV for February was $154.8 billion, up 31.6% yoy, also up from January’s $148.1 billion. Total transactions in February were up 15% yoy at 200k, but down from the previous month’s 222k.
| February 2024 Avg. Daily Loan Value | February 2023 Avg. Daily Loan Value | % Change | February 2024 Total Transactions | February 2023 Total Transactions | % Change | |
| Market Loan + Hedge Total | 154,774,637,195 | 117,615,756,215 | 31.6% | 200,117 | 173,888 | 15.08% |
In its February Securities Finance Snapshot, S&P Global Market Intelligence reported a 21% decline in monthly revenues yoy to $837 million, also down from January’s $856 million: Asia Equity revenues increased 2% yoy; fixed income assets continue to experience a decline in fees; and lendable value surges as equity markets touch all-time highs.
“In the securities lending markets, the downward trend in revenues continued. Record equity market valuations seen during the month squeezed utilization lower as average fees declined yoy, ” according to commentary from Matt Chessum, director for securities finance.
In the fixed income markets revenues declined yoy across both government and corporate bonds. Both asset classes continued to experience a steady decline in average fees whilst on loan balances increased.
In the equity markets, securities lending revenues declined by 24% yoy with the largest declines in revenues, once again, being seen across European equities ($54 million -42% yoy). Many markets within the region continued to witness double digit yoy declines in revenues with large yoy declines also seen across average fees.
In separate commentary, S&P Global data show that short interest across European equities fell to the lowest level in a decade: “Short loan value as a percentage of market capitalization recently dipped to 17bps.”
S&P Global’s long/short report ranks top shorts by their percentage of shares outstanding on loan. Over February, short interest increased across global equities. In the fixed income markets, government bond utilization increased by 31bps month-on-month and corporate bond utilization remained flat for the same time period (value of implied short positions vs value of institutional longs).
The most shorted sectors per region were: global equities – REITs; US equities – financial services; APAC equities – automobile and components; European equities – real estate management and development.
In Hazeltree’s shortside crowdedness report, the top shorted securities across global jurisdictions were:
Europe, Middle East and Africa
- In the large-cap category, luxury goods conglomerate LVMH was the most crowded security (99), while Maersk B had the highest institutional supply utilization (30.03%).
- In the mid-cap category, French rail manufacturer Alstom was the most crowded security (99) and had the highest institutional supply utilization (75.32%).
- In the small-cap category, Irish video game company Keywords Studio plc and fitness center operator Basic Fit NV were the most crowded securities, each with a score of 99. Basic Fit NV had the highest institutional supply utilization (88.74%).
Americas
- In the large-cap category, Tesla was the most crowded security (99), followed by Chevron (94) and Exxon Mobil (92). Multiple newcomers joined the ranks, including Super Micro Computer (87), Capital One (76), Comcast (76), and Wells Fargo (74).
- In the mid-cap category, semiconductor developer Wolfspeed Inc. was the most crowded security (99), while Choice Hotels International had the highest institutional supply utilization (49.93%).
- In the small-cap category, Bloom Energy was the most crowded security (99), while Purecycle Technologies displayed the highest institutional supply utilization (99.03%).
APAC
- In the large-cap category, Toyota took over first place for the most crowded security (99), knocking Takeda Pharmaceutical Co. (84) down the list. Advantest led in institutional supply utilization (13%).
- In the mid-cap category, Japanese electronics company Ibiden Co Ltd. was the most crowded security (99), rising from a crowdedness score of 94 in January. Pilbara Minerals Ltd stood out with the highest institutional supply utilization (57.63%).
- In the small-cap category, Furukawa Electric entered the ranking of the top 10 most crowded securities, with a score of 99, overtaking Webjet Ltd. (83). Aeon Financial Service had the highest institutional supply utilization (54.87%).
Note: EquiLend NGT and its market data service DataLend did not report February figures.
***Because firms report a wide variety of activities and products, the results are not a straight-up comparison, rather the intent is to provide a snapshot of shifting market dynamics across industry players both broad and granular as well as a review of the state-of-play before the next set of results stream.