By Daniel Hunter
The European Central Bank (ECB) is publishing the results of the Euro Money Market Survey 2013, which highlights the main developments in the euro money market in the second quarter of 2013, comparing them with those in the second quarter of 2012.
The results of this year's survey, which are derived from a constant panel of 104 banks (unless otherwise indicated; see the notes below), show the following:
- Aggregate turnover in the segments of the euro money markets captured by the survey expanded by 3%, to €75 trillion, after having decreased by 18% last year.
- In the unsecured market, cash borrowing of the banks on the panel decreased by 44%, to €1.75 trillion, while their lending declined by 17%, to €1.46 trillion. Total trading activity remained concentrated on maturities of one week or less. Overnight transactions accounted for 67% of total borrowing and for 86% of all lending activity, remaining more or less unchanged this year.
- The secured market remained the largest segment. Total turnover in secured lending and borrowing rose by 17%, to €30 trillion, mainly on account of a 27% increase in activity relating to overnight maturities, while turnover for maturities of between "tomorrow/next"
and one week increased by 16%. Trading in longer maturities accounted for less than 7% of total secured trading.
- 71% of all bilateral repo transactions were cleared by central counterparties, compared with a revised figure of 56% in 2012.
- Activity in the derivative segments covered by the survey remained broadly unchanged. Expressed as percentages, the most significant changes in activity were observed in cross-currency swaps (where turnover decreased by 26%) and in interest rate swaps other than foreign exchange and cross currency swaps (where turnover increased by 21%).
- Taking into account the feedback received from all of the 161 banks surveyed, the unsecured market remained the least concentrated segment, with 20% of the banks accounting for 87% of the transactions, while interest rate swaps became the most concentrated, with 20% of the banks accounting for 99.5% of the transactions.
- Reported turnover in the outright secondary market for short-term paper was 11% lower than in the previous year. Turnover for short-term paper issued by credit institutions increased by 10%, while turnover in government issues reported by the surveyed banks decreased by 22%.
- Electronic trading decreased in most money market segments, while other forms of trading increased in most of them.
- The qualitative part of the survey shows that perceived efficiency and liquidity conditions in the unsecured market improved only marginally and remain rather low. As regards the secured market, perceived efficiency and liquidity conditions improved marginally as well, but from higher levels than the unsecured market. For most other market segments, clearer improvements of perceived efficiency were reported in 2013, although it was generally felt that liquidity conditions had not become better.
- This year's survey also covered prospective questions, as were reported for the first time in the 2012 survey. Participants were asked to assess how their interbank trading volumes or the number of their counterparties were expected to evolve in the light of expected changes to the risk limits. The overall results suggest that conditions are stabilising: compared with 2012, more of the 161 responding banks expect that limits will not be changed. Expectations of both reductions and increases in limits declined.
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