Euro Area’s Repo-Market Crunch Undercuts Draghi’s Insouciance

Mario Draghi’s soothing words on the perceived scarcity of euro-area bonds have done little to dispel concern that the European Central Bank’s quantitative easing is snarling up a key part of the debt market’s plumbing.

A glance at the German repurchase market suggests the availability of bonds as collateral for loans is drying up, according to Subhrajit Banerjee, a fixed-income strategist at HSBC Holdings Plc in London. The risk is that this will start a chain-reaction that shrivels liquidity in the cash-bond market, he wrote in a research report on Thursday.