ECB's QE to have massive impact in terms of increasing liquidity

The ECB's liquidity bazooka will push the surplus to more than €1trn by the end of the programme next year and cause a scarcity of high quality collateral in the repo market.
 
The maturity of the two 3y LTROs at the end of January and February has passed without anysignificant impact on liquidity conditions. Banks have rolled their remaining 3y borrowing into the 3m LTRO and in the weekly MRO. 

The liquidity surplus has therefore stabilized at about €150bn and it is likely to remain at around this level until the beginning of the ECB's extended asset purchases programme on March 9.
 
Barclays notes as follows on Monday:

• With €1.14tn of liquidity that will be injected from March 2015 until September 2016, we expect the ECB's programme to have a massive impact on the euro money markets, in terms of increasing the liquidity surplus as well as a via a significant reduction of high quality collateral for repo transactions.
• We see room for a further decline in euro short rates into negative territory. This would be very challenging for Euro Money Markets investors.
  
  
• QE liquidity will remain in the banking system, thus forcing some banks to redeposit at the ECB/NCB at the negative depo rate.