ECB released its weekly statement for the week ending on 6 July.

Asset Side

On the asset side, weekly USD liquidity-providing operations increased from $2.6bn to $4.3bn (+$1,7bn), continuing the trend of growth in USD swap usage. Lending to credit institutions dropped by €17.3bn through a smaller MRO of €163.5bn (16.7bn change) as well as an decrease in LTRO (-€1.5bn). ‘Other Claims’ (ELA) decreased (after a very long time) by €2.2bn. Both should be seen as signs of stabilization.

Liabilities Side

Banknotes increased by 3.8bn while bank reserves decreased by €4.9bn. A positive development was the drop in ‘Deposits related to margin calls’ by €2.4bn. General government accounts decreased €11.4bn (a large change).

After steadily increasing during the last few months, ‘Liabilities to non-euro area residents’ finally posted a drop of €10.2bn this week, following stabilization of last week. The change is quite significant, although it is hard to tell if the cause was a reversal of euro outflows or central bank asset managers finally deciding to invest (increased) FX reserves in liquid assets instead of keeping them in reserve accounts. Data from the SNB (such as amounts in sight deposits) point mainly to the second explanation.


This week’s MRO was more or less the same as the maturing one (at €163.7bn). This is another sign of  total liquidity needs stabilizing. Last week’s projections of lower current account holdings and large fund movements from government accounts seem to have been confirmed. A 1-month LTRO was also tendered with the amount lent settling to €24.4bn, an increase of €5.5bn compared with the maturing LTRO. So it seems that total liquidity provision increased.

SMP Fixed Deposits

What was quite interesting are the latest SMP fixed term deposits auction results. Since the ECB dropped the deposit rate to zero, current accounts and fixed deposits are the only ‘risk-free’ assets available from the ECB which provide a positive rate of return. As would have been anticipated, rates on the deposit dropped to a marginal rate of 0.03%, compared with 0.26% at the last auction, while bidding was quite high at €424.8bn (with €211.5bn allotted). The remaining funds (€213.3bn) should be considered as liquidity available for lending in the money markets while the rate achieved provides an estimation for short-term (weekly) repo loan rates in the Euro area which continue to drop to extremely low numbers.