ECB Survey: Majority Of Respondents Reported Stabilization In Market Liquidity Conditions

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Thursday, a money market survey released by the European Central Bank showed that the aggregate turnover in the euro money market dipped for the second consecutive year, mainly due to a fall in activity in the unsecured market.

The "Euro Money Market Survey" for the second quarter, carried out for a panel of 105 banks, showed that the aggregate turnover in the euro money market declined for the second consecutive year, falling 5%. The most significant decrease was in the unsecured market, where turnover fell 25%.

The decline in the unsecured market was more severe for the longer maturities as turnover contracted by 44% for maturities from three months to one year, the report said. "From the respondents' point of view, liquidity conditions and efficiency in the unsecured market also continued to deteriorate," the central bank said.

However, the turnover in the resilient secured market rose 5%, following last year's fall and remained the largest segment of the money market, the report said. Overnight activity in this segment continued to increase this year, accounting for 27% of secured trades, the largest share since 2003.

For the first time, the survey compiled data on activity in the secured market cleared through central counter parties, which forms 39% of total secured market turnover.

Meanwhile, with regard to qualitative aspect, the survey showed that with the exception of the unsecured market, in all other market segments, a majority of respondents said there was some stabilization and improvement in market liquidity conditions, following the deterioration seen in the second quarter last year. However, a significant proportion of respondents also said there was a further deterioration in the all segments of the euro money market in the second quarter.

The money market survey illustrates the main developments in the euro money market in the second quarter of 2009, in comparison with the second quarter of 2008. The survey refers to the second quarter of each year and a complete study based on the data is released every second year. The next survey and the complete study will be published in 2010, the central bank said.

(Market News Provided by RTTNews)