The European repurchase market declined 15.3 percent in December, as compared to the prior June, because of the unwinding of some “very large and somewhat specialized transactions,” the European Repo Council reported March 10.
The council did not identify the specialized transactions except that they came from outside the Eurozone and were denominated in part in dollars.
From the report:
Beneath these unusual swings in activity, there is still a discernible trend towards recovery in the repo market.
We continue to believe that repo market in Europe will become more important than ever as regulatory initiatives designed to ensure the stability of the financial system steer banks towards secured forms of lending.
The council, which is part of the Zurich-based International Capital Markets Association, surveys the European repo market twice a year.
No comparable information is collected in the United States.
The total value of repo contracts outstanding at the close of business on December 8 was $8,528 billion, down from $10,074 billion in June 2010 but above the December 2009 total of $8,058 billion, the council reported.
Fifty-seven respondents reported both repo loans and borrowings, which means volumes are inflated by some double counting.
Tri-party repo represented 11.5 percent of the action, up from 7.9 percent in June. Nearly 19 percent of transactions on repo desks were securities lending, up from 15.4 percent. There was a revival of the repo market in Spain, the repo council noted.
The survey does not include the value of repos transacted with central banks. It has been conducted twice a year since 2001. The next survey is scheduled to take place at close of business on Wednesday, June 8, 2011.