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2026-07-14 17:30:11
[ECB's Overnight Deposit Facility Absorbs €2 Trillion in Liquidity; Market Remains Cautiously Optimistic About Easing Stance] ⑴ The European Central Bank (ECB) released its latest liquidity usage data on Tuesday. Financial institutions borrowed €36 million through the overnight lending facility, a significant decrease from the previous day's €150 million. Meanwhile, the overnight deposit facility absorbed €2.028268 billion, slightly lower than the previous day's €2.037559 billion, but still remaining at historically high levels. ⑵ Current account holdings have slightly decreased to €329.043 billion. Combined with the continued accumulation of massive amounts of funds in the deposit facility, this indicates that the Eurozone banking system remains extremely liquid. Institutions are more inclined to deposit excess cash with the central bank to obtain returns rather than actively lending it out or investing in risky assets. ⑶ From a trading psychology perspective, the coexistence of shrinking overnight lending demand and high deposit levels reflects a more stable market pricing in the ECB's policy interest rate path. Against the backdrop of concerns about global trade frictions triggered by Trump's tariff remarks, Eurozone financial institutions are choosing to hold highly liquid and safe assets to cope with potential external shocks. (4) The focus going forward is on whether the ECB can strike a balance between the balance sheet reduction process and maintaining ample liquidity. If geopolitical risks further push up energy prices, it may strengthen market expectations that the central bank will maintain an accommodative stance, thereby further suppressing the steepening of the money market yield curve.
