Yesterday, the ECB's Benoit Coeure spoke on.....>

ECB: Yesterday, the ECB's Benoit Coeure spoke on "Asset purchases, financial

regulation and repo market activity". It is truly very interesting containing

info that is usually not available. To summarise:

- Trading in GC repo has fallen but specific repo has risen. However, the share

of German collateral trading special has started to decline after the ECB

introduced the cash for collateral facility; the share of German bonds trading

special is down to 30% from 50%. 

- Also, prior to the cash for collateral facility, "there was a strong positive

relationship between the level of excess liquidity and repo rates, not only for

trades backed by German collateral, but also for those involving French and, to

a lesser extent, Italian securities. The moment we amended our securities

lending facility in December last year, the relationship broke down". 

- Whether a bond trades special depends upon supply and a 1% decline in

effective supply increases specialness by up to 5bp according an an ECB study.

- Also, Coeure shows that the leverage ratio has pushed repo to CCP and the mkt

puts a premium on CCP repo transactions.