The European Central Bank published Working Paper No 3205 analysing how the euro-denominated repo market behaves during episodes of elevated financial stress, using transaction-level data from the Securities Financing Transactions Data Store and network methods. The paper finds the market remained resilient over 2021 to mid-February 2025, with stress associated mainly with lower repo spreads rather than reduced activity or tighter contractual terms. The analysis identifies a core–periphery structure in the institutional network, with a small set of highly active institutions conducting most trades and interacting with a large, sparsely connected periphery. Network connectivity intensifies during stress and has trended upwards over time, largely driven by increased bank-to-bank linkages. At the sector level, trading volumes and spreads between sectors are broadly stable in high-stress periods; in aggregate regressions, higher systemic stress (measured by the new Composite Indicator of Systemic Stress) is linked to a statistically significant decline in repo spreads while volumes, haircuts and maturities are not significantly affected. The dataset covers 28.2 million repo transactions (around EUR 715tn in cumulative volume) involving 4,572 institutions, with high-stress days classified using a k-means approach corresponding to a CISS threshold of 0.239.
European Central Bank 2026-03-25
European Central Bank working paper finds euro repo market connectivity rises under stress while repo spreads fall
The European Central Bank's Working Paper No 3205 examines the euro-denominated repo market's resilience during financial stress, using transaction-level data and network methods. The study finds that from 2021 to mid-February 2025, the market remained stable, with stress linked to lower repo spreads rather than reduced activity. The analysis reveals a core–periphery network structure, with increased bank-to-bank linkages driving connectivity during stress periods.