ECB: 2024 Euro Money Market Survey: Descriptive Statistics (1/2)
Yesterday, the ECB released its 2024 Euro Money Market Study. Although backward-looking in nature, its findings are interesting in the context of ongoing ECB QT and expectations for heightened European (especially German) issuance to fund defence/infrastructure spending. The survey “provides a comprehensive analysis of euro money markets using trade data from the 45 largest euro area banks”. Some highlights:
- “The spread between euro money market rates and the DFR narrowed, with a more pronounced effect on secured than unsecured rates. The rise in secured rates is mainly a result of increased net collateral supply and shifts in interest rate expectations, prompting market participants to take short positions in the period 2022-2023 and then move to long positions in 2024. The impact on short-term money markets of less ample reserves and adjustments to the ECB operational framework has been limited so far”.
- “The unsecured euro short-term rate (€STR) showed low sensitivity to reductions in excess liquidity, with its negative spread to the DFR remaining more persistent than historical data suggested. Meanwhile, repo rates based on general collateral (GC) transactions, driven by the search for cash and representing about 12% of repo turnover, narrowed their spread in line with the historical trends. The divergence in rates between the secured and unsecured segments has led to potential arbitrage opportunities, yet these remained largely unexploited at the end of 2024”.
- “In the period 2023-2024, three primary influences shaped money market trends: (i) a decrease in excess reserves; (ii) changes in the supply and demand dynamics of collateral; and (iii) modifications to policy rates, remuneration terms and the operational framework”.
- “Significant Eurosystem balance sheet reduction led to better liquidity redistribution among banks”.
- “A shift from collateral scarcity to collateral abundance had a significant impact on the normalisation of repo rates. Repo rates based on different collateral jurisdictions converged and were closer to the DFR”.
- “Thanks to ample Eurosystem excess liquidity and favourable market conditions for bank funding, the reduction in the MRO rate spread to 15 basis points did not affect money market rates or volumes”
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MNI: REMINDER: Livestream MNI Connect With BOE's Breeden On Apr 10
You are invited to listen to a Livestreamed MNI Connect Video Conference with BOE's Sarah Breeden.
Details below:
- TOPIC OF DISCUSSION: UK Economic and Financial Stability Prospects
- DATE: Thursday, 10 Apr 2025
- TIME: 14:00 - 15:30 BST
- This event will be run as a Zoom Webinar and is a public, on-the-record event.
To register please go to: MNI Webcast Registration
LOOK AHEAD: Tuesday Data Calendar: JOLTS, ISMs, Regional Fed Data
- US Data/Speaker Calendar (prior, estimate)
- 01-Apr 0900 Richmond Fed Barkin economic outlook
- 01-Apr 0945 S&P Global US Manufacturing PMI (49.8, 49.9)
- 01-Apr 1000 Construction Spending MoM (-0.2%, 0.3%)
- 01-Apr 1000 JOLTS Job Openings (7.74M, 7.655M), Rate (4.6%, 4.6%)
- 01-Apr 1000 JOLTS Quits Level (3.266M, 3.186M), Rate (2.1%, --)
- 01-Apr 1000 ISM Manufacturing (50.3, 49.5)
- 01-Apr 1000 ISM Prices Paid (62.4, 64.6)
- 01-Apr 1000 ISM New Orders (48.6, 48.4)
- 01-Apr 1000 ISM Employment (47.6, 47.2)
- 01-Apr 1030 Dallas Fed Services Activity (4.6, --)
- 01-Apr 1130 US Tsy $70B 6W bill & $50B 14D CMB auctions
TARIFFS: WaPo-WH Draft Proposal Has Tariffs ~20% On 'At Least Most Imports'
The Washington Post reports that "White House aides have drafted a proposal to impose tariffs of around 20 percent on at least most imports to the United States, three people familiar with the matter said,". While the looming 'reciprocal' tariffs to be imposed from April 2 have been top of the news cycle for some time, there has been very little concrete information about their nature. As such, these comments come as some of the first indications about what level the levies might settle at.
- WaPo: "Wilbur Ross, who served as commerce secretary during Trump’s first term, said the White House is considering setting one flat rate on imports of between 15 percent and 25 percent. He said administration officials are wrestling with the complicated question of how to change existing tariffs on countries that are higher or lower than that amount to align with the new target. "
- Ross adds that “there are some people in the White House who are undoubtedly more extreme” than Treasury Sec. Scott Bessent and Commerce Sec. Howard Lutnick, who are seen to support different rates for different countries. Highlights it is Trump who will make the undisputed final call.
- The story cautions that despite the draft proposal mentioned, there is no final decision yet. The main options remain either raising tariffs on almost all products from almost all countries in an effort to ramp up the quantity of funds brought in by such measures. The other is applying different rates to different countries, ensuring full reciprocity.
