The European Central Bank published its 2024 Euro money market study, analysing daily money market statistical reporting (MMSR) trades from 45 large euro area banks across secured repo, unsecured cash, short-term securities, foreign exchange swaps and overnight index swaps between January 2023 and December 2024. The study finds a broad rise in market activity and convergence of short-term rates towards the deposit facility rate (DFR), alongside a persistent divergence between secured and unsecured overnight rates that created largely unexploited arbitrage opportunities. Daily aggregate turnover rose 38% to EUR 1.8 trillion in 2024 (from EUR 1.3 trillion in 2022), with secured transactions up 41%, unsecured up 28% and overnight index swaps up 101%, while short-term securities issuance fell 32% and FX swaps fell 12% as activity shifted to slightly longer maturities. Trading remained concentrated in very short tenors and dominated by non-bank counterparties, while interbank activity stayed modest; central counterparties cleared around 70% of secured turnover and most OIS. The analysis attributes the key dynamics to declining excess liquidity as the Eurosystem balance sheet fell by more than one-third from its November 2022 peak, a shift from collateral scarcity to collateral abundance that added nearly EUR 1 trillion in government bonds to the market and normalised repo pricing, and ECB policy adjustments including changes to government deposit remuneration (ceiling set at €STR minus 20 basis points from 1 May 2023), the end of remuneration on minimum reserves (September 2023), and operational framework changes that reduced the spread between the main refinancing operations rate and the DFR from 50 to 15 basis points effective 18 September 2024. Looking ahead, the ECB notes that the 2026 Euro money market study will broaden its scope to include trades executed by 69 MMSR reporting banks following the expansion of the reporting population on 1 July 2024; early indications from the new reporters point to higher measured turnover, particularly in FX swaps. The new banks’ data are also scheduled to be included in the €STR after 1 July 2025, and a review of key operational framework parameters is planned for 2026.
European Central Bank 2025-04-30
European Central Bank publishes Euro money market study showing daily turnover at EUR 1.8 trillion and persistent secured and unsecured overnight rate gap
The European Central Bank's 2024 Euro money market study shows a 38% increase in daily turnover to EUR 1.8 trillion, driven by secured and unsecured transactions and overnight index swaps, despite a decline in short-term securities and FX swaps. The study highlights a convergence of short-term rates towards the deposit facility rate and persistent arbitrage opportunities due to rate divergences. Key dynamics include declining excess liquidity, a shift to collateral abundance, and ECB policy adjustments affecting market activity and pricing.