The not-so-big roll-over, banks take €132bn at ECB’s 3M LTRO
Posted by Tracy Alloway on Jun 30 10:22.
That’s very much below the consensus roll-over estimate of about €220bn – 250bn.
Which means (shock) eurozone banks are doing relatively alright, on the whole.
So, not with a bang, but a whimper come the results of the European Central Bank’s three-month Long-Term Refinancing Operation (LTRO) — the liquidity op meant to replace its €442bn 12-month LTRO, which expires tomorrow, Thursday. A total of €131.9bn was tapped from the central bank — which means less than a third of the 12-month LTRO was rolled-over into the three-month op.
Of course, that €132bn figure could well disguise discrepancies between banks. Spanish banks kicked up a fuss earlier this week about the 12-month expiry. BNP Paribas analysts estimate Spain’s cajas fund almost 21 per cent of their balance sheets with ECB-largess, and the big four Spanish banks 12 per cent.
It may be cheaper for most banks to fund themselves in the market, but probably not for everyone.
As for those money markets, that three-month LTRO figure can tell us something too. Most analysts estimate there’s something like €300bn worth of excess liquidity in the eurozone system, which means about €130 – 140bn needed to be rolled over just to maintain that excess liquidity.
Danske Bank explains:
If excess liquidity falls below EUR 0bn (implying a roll well below EUR127bn), it could push EONIA rates higher as it would be a sign of less stress in the money markets. This would increase expectations that the ECB restores its exit strategy in Q4 10. A risk scenario, which we however find unlikely, is that the ECB could be forced to lower its main refinancing rate to push down EONIA rates.
Again, it’s kind of a darned-if-you-do-roll-over-less-than-expected and darned-if-you-don’t, in terms of money market rates like Eonia and Libor, anyway.
But nevermind that, for now. Markets are rallying on this. |
