EU debt wave raises dealer capacity concerns
Ongoing QT and upcoming defence spending piles pressure on bank balance sheet supply, say dealers
Dealers have warned of mounting pressure on balance sheet capacity for European government bond and repo, as sovereign debt supply rises with quantitative tightening (QT) and increased defence spending, while regulatory constraints limit intermediation capacity.
The strain comes from a glut of European government bonds (EGBs) expected to enter the market in the coming year, but with limited expansion of bank balance sheet to accommodate it.
€500 billionValue of bonds the ECB will let roll off its
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