Commerzbank Run Through Short-Term Money Market Matters

Commerzbank note that “in money markets, cash is undeniably attractive as investors can achieve 3.91% in reverse repos against German general collateral.”

• “Competition could be picking up though. The German public sector could add to the demand for short-term paper when facing 0% on €52bn Bundesbank deposits after next week.”
• “At the same time, the DFA may cut BuBill issuance alongside Bunds in the Q4 calendar that will be released on Tuesday.”
• “So far, repos have hardly reacted with German GC still close to €STR flat and term repos also relaxed.”
• “BuBills did see some traction though with interpolated spreads moving further below the €STR-20 level.”
• “Encouragingly for our strategic short swap spread call, however, Schatz-, Bobl-, and Bund-spreads have barely reacted, underscoring that the gap vis-a-vis funding spreads is still too wide.”