ECB Balance Sheet Reduction Driving Up Borrowing Costs Across Europe
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ECB's liquidity drain is lifting borrowing costs in Europe's funding markets as it reverses years of easy monetary policy, per BofA strategist
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As ECB reduces balance sheet, banks will compete more for reserves, driving up repo rates
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Funding pressures may weigh on Euribor, with BofA expecting it to widen to 20bps over €str by September
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Italy and Spain most vulnerable due to uneven distribution of excess liquidity, likely driving a bigger wedge between German and Italian repo rates
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BofA estimates Italian banks may need €220B more reserves by year-end, Spanish banks €90B more to satisfy requirements