Halister News

(Bloomberg) -- Many banks “still on the hunt for collateral,” so shortage may intensify into December and won’t calm unless the ECB changes the rules and expands list of acceptable collateral, DZ Bank analysts Rene Albrecht and Daniel Lenz write in note.

• Banks need to boost collateral before upcoming regulatory reporting date
• There’s “lack of trust in ECB as the ‘lender of last repo,’” because its announcement about altering securities lending operations only “eased the situation briefly”
• Fear of a lack of collateral becoming more widespread as the lower that bund, schatz yields fall, the more banks find themselves forced to “stock up” to avoid paying higher bond prices
• Schatz demand growing because ECB, Bundesbank purchases of bunds and bobls has forced banks to switch to the short-end of the bund curve
  • ECB has fewer short-term notes because there’s been phases where only schatz complied with the PSPP yield floor
  • NOTE: Schatz yielding -0.747%, rose to -0.702% Nov. 23
• NOTE: German, French, Italian, Spanish repo rates all trading through ECB’s -0.40% deposit rate