A Look At Liquidity Matters

While there has been an uptick in both the LTRO and MRO usage over the last couple of days (around today’s TLTRO repayments) the situation seemingly remains somewhat insulated, particularly when assessed against the size of the prevailing Eurozone excess liquidity.

• There was only a very small uptick in usage of the marginal lending facility, some had suggested there could be a jump acting as a bridge re: any financing requirements surrounding today’s TLTRO repayment and a switch into LTROs.
• EUR4.32695bn allotted to 29 banks in 3-month LTRO, up from the sub-EUR800mn seen last time out, with some seemingly rolling funding needs from the expiring TLTRO into the LTRO.
• This could be a little more fluid in the times ahead as ECB balance sheet dynamics evolve and individual cases of stress cannot be ruled out, but this week’s liquidity operations indicate that the worst-case short-term scenario was avoided (fears surrounding smaller Italian banks re: TLTRO repayments had already receded from extremes).
• Euribor futures extend on their post-Italian CPI gains, but the moves are limited in the grander scheme of things, with the strip running 2.5-5.5bp richer through the reds, in a steepening motion.