Snapshot of the European repo market

The baseline figure for market size at €6,204 billion. 

Modest growth in the market of 2.6% year on year

A contraction in market size of 3.3% from the June 2011 survey using a constant sample. 

Overall, the share of government bonds within the pool of EU originated collateral rebounded in this most recent survey to 79.1% of the market from 74.3% in the previous survey.

The market share of German collateral continued to fall, touching 20.9% of the total (from 24.9% in December 2010), as risk-averse investors became more cautious about lending these safe haven securities.

The share of Italian collateral also fell to 7.0% (from 10.3% in the December 2010 survey) possibly reflecting credit concerns. 

Market users continue to make use of central clearing counterparties to settle their repos in a low-risk environment.

The share of CCP-cleared repos rose to 32% of the survey business, from 30.5% in June 2011.

Transactions of less than one month (so-called ‘short dates’) have dropped sharply, whilst repos of over one-year duration have continued to increase their share of the survey, rising to 12.7% of the total from 9% in the June survey, as banks respond to regulatory pressure and their own concerns over market liquidity by seeking longer-term funding.

The market share of tri-party repo remained steady at 11.4%.

“The survey demonstrates that the European repo market, an essential source of bank financing in Europe, has been able to maintain its stability during challenging market conditions up to the early part of December. The survey was taken ahead of the three-year liquidity provisions of the Eurosystem and anecdotal evidence points to a slowdown in the interbank repo market since. As a community we are sure that the Eurosystem will look at all impacts of this welcome intervention, including the increasing lock-up within the Eurosystem of an important part of the available collateral.”