Eurex Repo to fund GC Pooling and Euro Repo markets
21 January 2013 Frankfurt
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Eurex Repo will extend the maximum term of tradable securities for the Eurex Repo markets such as GC Pooling and Euro Repo.
Currently, the maximum duration for transaction is one year. As of 21 January, customers can also trade terms of up to two years.
With this step, Eurex Repo provides its market participants with a new and easy-to-use opportunity to make use of the repayment option of the long term refinancing operations (LTRO) of the European Central Bank (ECB).
Starting on 30 January, the ECB will allow banks for the first time to prematurely return LTRO liquidity that they borrowed from it in December 2011 and February 2012 with a maturity of 3 years.
The fixed rate for the ECB loan is significantly higher than the current interest rate in the market.
“In close coordination with our participants, we have realised this innovative extension within a short time frame. It is a reflection of market demand and will help banks to re-allocate their funding necessities to a cost-sensitive, secure and efficient alternative like our GC Pooling market,” said Marcel Naas, managing director of Eurex Repo.
The market consultation revealed that the current liquidity situation that is expressed by a flat yield curve shifts market activity significantly into longer terms in the OTC markets, especially into terms over one year, he added.
Currently, the maximum duration for transaction is one year. As of 21 January, customers can also trade terms of up to two years.
With this step, Eurex Repo provides its market participants with a new and easy-to-use opportunity to make use of the repayment option of the long term refinancing operations (LTRO) of the European Central Bank (ECB).
Starting on 30 January, the ECB will allow banks for the first time to prematurely return LTRO liquidity that they borrowed from it in December 2011 and February 2012 with a maturity of 3 years.
The fixed rate for the ECB loan is significantly higher than the current interest rate in the market.
“In close coordination with our participants, we have realised this innovative extension within a short time frame. It is a reflection of market demand and will help banks to re-allocate their funding necessities to a cost-sensitive, secure and efficient alternative like our GC Pooling market,” said Marcel Naas, managing director of Eurex Repo.
The market consultation revealed that the current liquidity situation that is expressed by a flat yield curve shifts market activity significantly into longer terms in the OTC markets, especially into terms over one year, he added.
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