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ECB Data Strengthen Case to Follow Fed’s Lead for Funding Rates

  • Usage of the European bank’s lending facility has been rising
  • Demand for the US reverse repo facility is above $2 trillion
European Central Bank headquarters in Frankfurt.

European Central Bank headquarters in Frankfurt.

Photographer: Alex Kraus/Bloomberg

The continuing reliance of the European Central Bank’s securities lending facility strengthens the argument that it should replicate a prominent Federal Reserve tool used to alleviate collateral scarcity. 

The aggregate balance of securities lent by the eurosystem was roughly 140 billion euros at the end of June from 118 billion euros the previous month, according to Deutsche Bank Securities, citing ECB data published Tuesday. Strategists also noted a proxy based on the central bank’s balance sheet that indicates usage has increased slightly during the July/August period.