Commerzbank Look Into Potential Followers On 0% Remuneration For Gov’t Deposits

Commerzbank write “who's next" to follow the Bundesbank 0% is one of the key questions. Domestic public deposits vary widely across countries. More importantly, in relation to the domestic bill/bond market, the variations are extreme and hence also the impact of a potential deposit rotation.”

• “If the Greek or Irish central bank were to go to 0%, the domestic deposits affected would be 700% and 320% of outstanding sovereign bills and bonds with less than 1y maturity!”
• “For NTMA, the legacy ~€14bn Apple escrow account is independently managed by external asset managers, and NTMA's published annual cash surplus is consistent with ECB data. This suggests that almost all of the €25bn deposits with the Central Bank of Ireland are held by the NTMA. Given the NTMA's mission “To manage public assets and liabilities commercially and prudently”, even a small probability of the Irish central bank going to 0% remuneration and triggering deposit rotation carries significant impact.”
• “We stay long IRISH vs. core and Bunds (which has long been our favourite convergence trade). Similar arguments apply to PGBs.”