6th Summit for an Enlarged Europe · 6th Summit for an Enlarged Europe. Andreas Biewald Treasury...
Transcript of 6th Summit for an Enlarged Europe · 6th Summit for an Enlarged Europe. Andreas Biewald Treasury...
Andreas Biewald Treasury
27 / 28 May 2010
6th Summit for an Enlarged Europe
Andreas Biewald Treasury
Recent developments in the European Repo Market
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24 March 2010: Fitch downgrades Portugal’s credit rating (new AA-)
09 May 2010 EU/IMF approve € 750 billion rescue package
04 May 2010: Greek protesters storm the Acropolis as markets looses faith
02 May 2010: Greece granted € 110 bn aid to avert financial meltdown (IMF / EC / ECB)
28 April 2010 S&P downgrades Spain’s long term credit rating (new AA)
27 April 2010 S&P cuts Greece credit ratings to junk status (BB+)S&P downgrades Portugal’s credit rating ( A-)
23 April 2010: Greek activates € 45 bn EU/IMF loans
22 April 2010: Moody’s cuts Greece’s sovereign rating to A3
19 April 2010: Greek borrowing reaches record high (455 bp)
16 April 2010: Greek governments admits that it may need help from IMF
11 April 2010: EU ministers agree Greek’s bailout terms
04 April 2010: Fitch downgrades Greece’s credit rating (new BBB-)
29 March 2010: Greece struggles on after weak response to 7 yr GGB bond sale
4 March 2010: 10 year GGB bond sales proves popular
3 March 2010: Greece unveils radical austerity package
.
Key events March – May 2010
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Selected 3M Repo Rates vs. EONIA
-20
-15
-10
-5
0
5
10
29/0
3/10
31/0
3/10
02/0
4/10
04/0
4/10
06/0
4/10
08/0
4/10
10/0
4/10
12/0
4/10
14/0
4/10
16/0
4/10
18/0
4/10
20/0
4/10
22/0
4/10
24/0
4/10
26/0
4/10
28/0
4/10
30/0
4/10
02/0
5/10
04/0
5/10
06/0
5/10
08/0
5/10
10/0
5/10
Eurepo Germany Frankreich Belgien Italien Länder & Jumbos ECB
Source: Commerzbank Treasury – Secured Funding Desk
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Selected 3M Repo Rates vs. EONIA
-20
-15
-10
-5
0
5
1029
/03/
10
31/0
3/10
02/0
4/10
04/0
4/10
06/0
4/10
08/0
4/10
10/0
4/10
12/0
4/10
14/0
4/10
16/0
4/10
18/0
4/10
20/0
4/10
22/0
4/10
24/0
4/10
26/0
4/10
28/0
4/10
30/0
4/10
02/0
5/10
04/0
5/10
06/0
5/10
08/0
5/10
10/0
5/10
Eurepo Germany Frankreich Belgien Italien Länder & Jumbos ECB
Source: Commerzbank Treasury – Secured Funding Desk
Fitch downgrades Greece‘ CR
1. Greek bailout terms approved
Strong increase in Greek‘s CDS
S&P on Portugal, Greece & Spain
EU/IMF package
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Turnover in € Repo on selected ECNs
-
50,000
100,000
150,000
200,000
250,000
01/0
3/20
10
08/0
3/20
10
15/0
3/20
10
22/0
3/20
10
29/0
3/20
10
05/0
4/20
10
12/0
4/20
10
19/0
4/20
10
26/0
4/20
10
03/0
5/20
10
10/0
5/20
10
MTSBTEC EUR
Volume in million Euro per trade day.
Data provided by ICAP and MTS
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Observations & concluding remarks
• Spread Widening AAA / AA Government Paper versus A Paper driven by limited risk appetite of market participants (correlated risk & flight to quality)
• Return of ‚special‘ markets particularly in Germany
• ECB Paper issued by Non PIIGS countries trade at unchanged spread levels
•Outperformance of Covered Paper versus Governments in Spain
• Establishment of new classes for repos in EIB / KfW / Non PIIGS Municipals (increase in turnover, spread tightening)
•Liquidity in the repo market not effected -excl PI(I)GS
Andreas Biewald Treasury
Commerzbank’s business model
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Commerzbank‘s Treasury Set- Up
FX Swaps Active usage of the swap market to manage core currencies
Money Markets•Managing the Liquidity Profile•Providing access to unsecured Money•Access to central banks
Repos• Support short term
liquidity steering• Providing collateral
for central bank operations
Liquidity Management
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Pool Concept Treasury
Raise cash in the unsecured market in home currency or in the swap market
Place access liquidity in the repo market
Manage short term liquidity by both products depending on market opportunities
Broader list of counterparties for liquidity management (more counterparties for secured and unsecured businesses than for unsecured only)
Enhanced funding / investment opportunities along the entire curve
Principles
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Pool Concept Treasury
Advantages
Secured cash management as an alternative to the unsecured money market
Access to term funding if required through participation in regular central bank auctions or emergency central bank auctions
Re-use of collateral against central banks
Re-use in triparty
Re-use of collateral for intraday liquidity needs (payment services, settlements)
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Treasury Desk
CCP (LCH-Clearnet,
Eurex, MTS and others)
CommerzbankTreasury
BanksCorporate
Retail
BanksFunds
Cash +Collateral
Cash
Securities Lenders
F
R
A
N
C
H
I
S
E
Central BanksECB - FED - BoE
Triparty (CBL)
Cash vs. Collateral
Cash +Collateral
Cash +Collateral
Cash +Collateral
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Outlook: The future lies in a cross – asset class approach
Equity
Cash
Fixed Income
Listed Products
Commodities
Andreas Biewald Treasury
Outlook for Central & Eastern Europe
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Experience of the market participants
Experience of the market participants
Liquidity in the collateral market Liquidity in the
collateral market Legal Framework
(GMRA)Legal Framework
(GMRA)
Re-use facility of collateralwith central banks
Re-use facility of collateralwith central banks
Electronic Trading Systems / active broker
coverage
Electronic Trading Systems / active broker
coverage
Key Factors
of Success
Key Factors
of Success
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Central BanksCentral Banks
• The reasons to use repo are as diverse as the financial institutions in the market
• Investment opportunities• Liquidity management• Investment opportunities• Liquidity management
• Yield enhancement• Investment opportunities• Yield enhancement• Investment opportunities
• Financing positions• Yield enhancement• Investment opportunities
• Financing positions• Yield enhancement• Investment opportunities
BanksBanks• Yield enhancement• Investment opportunities• Financing positions
• Yield enhancement• Investment opportunities• Financing positions
• Yield enhancement• Hedge liabilities• Investment opportunities
• Yield enhancement• Hedge liabilities• Investment opportunities
Insurance Cos.Insurance Cos.
Pension FundsPension Funds • Yield enhancement• Investment opportunities• Yield enhancement• Investment opportunities
CorporationsCorporations
Money FundsMoney Funds
Market Participants
•Central & Eastern Europe:Repo market in the early stages Correlation risk
Experience of the market participants
Experience of the market participants
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• Appendix for jurisdiction
•Croatia
• Czech Republic
•Estonia
•Hungary
•Latvia
•Lithuania
•Poland
•Slovakia
•Slovenia
•Croatia
• Czech Republic
•Estonia
•Hungary
•Latvia
•Lithuania
•Poland
•Slovakia
•Slovenia
Global master Repurchase Agreement
•Central & Eastern Europe :Basic legal framework in place
Legal Framework (GMRA)
Legal Framework (GMRA)
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• Pricing of collateral • Regular issuance of Government bonds • Issues in size• Liquidity of the Government Bond market• Active Market Making
• Regular issuance of Government bonds • Issues in size• Liquidity of the Government Bond market• Active Market Making
The collateral market (Governments) Liquidity in the
collateral market Liquidity in the
collateral market
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• Cash Bond Market covered by MTS • Cash Bond Market covered by MTS
Electronic Trading Systems
•Central & Eastern Europe :Basis for electronic trading in selected markets
Electronic Trading Systems / active broker
coverage
Electronic Trading Systems / active broker
coverage
•Liquidity in Repo Market on MTS limited (Hungary, Lithuanian, Poland, Slovenia)•Liquidity in Repo Market on MTS limited (Hungary, Lithuanian, Poland, Slovenia)
•Market Making •(Hungary, Lithuanian, Poland, Slovenia)•Market Making •(Hungary, Lithuanian, Poland, Slovenia)
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Central Banks Re-use facility with
Major Central Banks Re-use facility with
Major Central Banks
• FED (Foreign Government Bonds, denominated in Euro, USD)• FED (Foreign Government Bonds, denominated in Euro, USD)
•ECB (Foreign Government Bonds, denominated in Euro,USD)•ECB (Foreign Government Bonds, denominated in Euro,USD)
•SNB (Foreign Government Bonds, denominated in CHF, Poland & Czech Republic)•SNB (Foreign Government Bonds, denominated in CHF, Poland & Czech Republic)
•BoE (Foreign Government Bonds in EUR, issued by Slovenia)•BoE (Foreign Government Bonds in EUR, issued by Slovenia)
Andreas Biewald Treasury
Andreas BiewaldHead of Funding
Tel.: +49 69 136-49695Fax: +49 69 136-29851Mail: [email protected]
Geschäftsräume:Mainzer Landstr. 15360327 Frankfurt/Main www.commerzbank.de
Postanschrift:60261 Frankfurt/MainTel.: +49 69 136-20Mail: [email protected]