Free Trial

Short-End Rates Climb Higher as ECB Raises Remuneration Ceiling

ECB
  • ECB announce they are to lower rates available to government deposits to incentive withdrawals from ECB deposits as a previous exemption policy rolls off at the end of April.
  • ECB step there is a small part of broader monetary policy, but is impactful for the repo market specifically.
  • These steps follow some fragility in the repo market evident halfway through 2022 - and is prompting some market reaction here: 2y German yields spiking on the move and hitting late highs at 2.6704%
  • Context here is that the ECB remuneration cap was set for a possible return - although some among the sell-side had seen the ECB possibly extending the 0% cap that was introduced in September last year. That hasn't come to fruition.
  • For markets, this means collateral scarcity could become an issue once more as treasuries are weaned off ECB deposits - although the ECB's move here is a signal that bank are confident in the improved conditions for money markets.

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.