13 March 2008

ICMA survey records resilience of the European repo market

ICMA released its semi-annual survey of the European repo market. “The survey clearly shows that, despite the turmoil in the financial markets since the last survey, the repo markets have shown remarkable resilience”, says Godfried De Vidts, Chairman of ICMA’s European Repo Council. “The repo markets are continuing to function well, providing much needed liquidity to borrowers. It is very much a case of business as usual”.

“Our survey shows a stable environment in the electronic markets, with the marked increase in voice trading reflecting volatile market conditions”, Godfried De Vidts added. “The financial markets are still experiencing turbulence and as a result of the flight to quality we expect a pick-up in the volume of trading in the government bond markets. This, together with the anticipated opening to multi-electronic trading platforms of the various Debt Management Offices in Europe means that we are likely to see an increase in the volumes outstanding in these repo market segments in the June 2008 repo survey”.

The other main findings of the survey were:

- The share of repo market business conducted through electronic trading systems is virtually unchanged from the last survey in June 2007 at 21.2%, and the same is true for anonymous ATS business standing at 10.5%.

- The market share of triparty repo was down to 9.1% (from 11.8% in the previous survey)

- Domestic business rose to 34.7% (from 32.0% in the previous survey), with a corresponding fall in business from non-eurozone countries to 28.5% (from 32.0% in June 2007), indicating that cross border liquidity has been affected by market turbulence

- Voice brokered business rose to 24.3% (from 18.7% in June 2007)

- Sterling repo rose to 15.5% from 12.4% in the previous survey whilst US$ repo fell to 11.7% from 15.5% in June 2007

- The share of open repo was down to 4.5% from 8.1% in the previous survey

- Transactions with a remaining term to maturity of 3-6 months increased to 26.9% from (18.9% in the last survey) at the expense of shorter term transactions, from 1 day to 1 month, which were down to 54.7% from 62.3%. This willingness to lock in to longer term financing demonstrates that the repo market was consistently open for business at this time.

- Forward repo share was up to 5.8% from 3.0%.

- The share of government bonds used as collateral continued its downward trend to 81.3% from 83.7%, indicating availability of other types of high quality collateral.

Press release

ICMA European repo market survey no.14 conducted December 2007

© ICMA