/STIR: Bank of America Expect MRO/LTRO Take-Up Of €70-100bn In Sep

Bank of America expect banks to borrow €70-100bn via ECB MROs and LTROs when the refi-depo corridor narrows to 15bp in September.

• Their expectations are based on:
• Where they expect excess liquidity will be in September given the QT profile and TLTRO roll-offs.
• The lower bound of LCR-related reserve demand estimates by country.
• They then expect take-up to rise over time assume that banks in countries with insufficient excess liquidity will make up the shortfall via a mixture of:
• Central bank funding
• Asset sales
• Debt issuance.
• They do note that “MRO/LTRO usage could come lower if banks are concerned about a negative stigma or if interbank lending by cash rich banks rise.”
• They also suggest that “a narrower refi-depo corridor reduces the fair value of 3-month Euribor-€str and could delay the expected convergence of €str to the depo” and now expect the “€str-depo spread to converge to 0bp in Q425 and 3M Euribor to be at 3.00% in Q424.”