Santander Corporate & Investment: This Wednesday European banks are to repay €477mm of TLTROs which will reduce excess liquidity in the system materially and funding via TLTROs to only around €600mm at a delicate time of acceleration of the QT programme from 1 July and with market sentiment further dampened after the ECB/FOMC and the flash PMIs plunge on Friday.
For Italian banks, a geography where the gap excess liquidity / funding of TLTROs is still negative, it will be interesting to see what formulas are chosen. As our rates strategists point out, this week’s MROs, which are announced tomorrow with settlement also on June 28th, could give us a clue as they already reflect a new situation that would have an impact on profitability, as the BoI pointed out in its recent financial stability report (MRO cost, 50bp > DFR).
All in all, the cushion for credit markets comes from a primary that is already starting to show signs of a summer slowdown, with only €11 billion last week and a very moderate maturity calendar until September.
