ECB’s LTRO Goes Better Than Expected
The ECB biggest ever liquidity facility – EUR 442 billion one year maturity is coming due tomorrow. To reduce the strain on the banks, ECB introduced 3 month LRTO (Long-Term Refinancing Operation) which banks could use to refinance the maturing facility.
The market estimate for the LTRO size was EUR 220 billion – EUR 250 billion.
The ECB just announced the results of the operation. Apparently the banks rolled-over (only) EUR 131.9 billion.
Screen 1. LTRO Allotment
Source: Bloomberg
Whether this points to improving liquidity in European banking sector or the “good” banks just used cheaper market financing and the “bad” ones borrowed from the ECB remains to be seen. I would go for latter.