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Nov v Dec TLTRO Repayment Views Vary; Modest Swap Spread Impact Seen (3/3)

ECB
More sell-side expectations of early TLTRO repayments and implications for swap tightening:
  • BNP:Around E650bln by end-2022 possible, with communication from Spanish banks alone suggesting E200bln of that. Banks in core and semi-core countries are more undecided, with regulatory considerations becoming paramount in decision-making. With banks needing more time to assess the situation, Nov likely to see a lower repayment than Dec.
  • Danske: The Nov 23 repayment could trigger "a large significant drop in excess liquidity of EUR 500bn-1tr"
  • Goldman: "full TLTRO repayments should free about E390bn of government bond collateral and thus contribute to swap spread tightening. That being said, given the recent tightening and possibility of funding pressures, it is unclear how much more tightening can be expected in the near-term."
  • ING: "What lower collateral shortage would achieve is to make swap spreads more sensitive to other factors, including improving risk appetite, and so add to tightening pressure. This is assuming the reasons for the improvement in risk sentiment holds up, however."
  • JPM: Around E500-700bln to be repaid in November.
  • Nordea: Expectations for early repayments are quite high in the range of E500-1,000bln by year-end, but the amount of German bonds posted as collateral vs these loans is likely to be small.
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More sell-side expectations of early TLTRO repayments and implications for swap tightening:
  • BNP:Around E650bln by end-2022 possible, with communication from Spanish banks alone suggesting E200bln of that. Banks in core and semi-core countries are more undecided, with regulatory considerations becoming paramount in decision-making. With banks needing more time to assess the situation, Nov likely to see a lower repayment than Dec.
  • Danske: The Nov 23 repayment could trigger "a large significant drop in excess liquidity of EUR 500bn-1tr"
  • Goldman: "full TLTRO repayments should free about E390bn of government bond collateral and thus contribute to swap spread tightening. That being said, given the recent tightening and possibility of funding pressures, it is unclear how much more tightening can be expected in the near-term."
  • ING: "What lower collateral shortage would achieve is to make swap spreads more sensitive to other factors, including improving risk appetite, and so add to tightening pressure. This is assuming the reasons for the improvement in risk sentiment holds up, however."
  • JPM: Around E500-700bln to be repaid in November.
  • Nordea: Expectations for early repayments are quite high in the range of E500-1,000bln by year-end, but the amount of German bonds posted as collateral vs these loans is likely to be small.