Macroeconomic liquidity, bank liquidity, market liquidity

Macroeconomic liquidity, bank Macroeconomic liquidity, bank liquidity, market liquidityliquidity, market liquidity

Patrick ARTUS

AFGAP - PRMIA - Scientific CommitteeAnnual Conference on Liquidity

Paris – April 5, 2012

2

1. Macroeconomic liquidity

Three concepts of liquidity

3

Monetary base (as % of GDP)

0

5

10

15

20

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

0

5

10

15

20 United States

Euro zone

Sources: Datastream, central banks, Natixis

4

Liquid and money-market assets held by companies (as % of GDP)

0

5

10

15

20

25

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

0

5

10

15

20

25 United States

Euro zone

Sources: FoF, ECB, Natixis

5

United States: Outstanding assets held by households (as % of GDP)

0

20

40

60

80

100

120

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

0

20

40

60

80

100

120

Equities Total bonds Life insurance and pension funds Liquid and money-markets assets

Sources: Datastream, FoF, Natixis

6

Euro zone: Assets held by households (in value terms, as % of GDP)

0

10

20

30

40

50

60

70

80

99 00 01 02 03 04 05 06 07 08 09 10 11 12

0

10

20

30

40

50

60

70

80

Equities Total bonds Life insurance and pension funds Liquid and money-markets assets

Sources: Datastream, ECB, Natixis

7

2. Bank liquidity

Three concepts of liquidity

8

Bank’s reserves at the central bank (as% of GDP)

0

5

10

15

20

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

0

5

10

15

20 United States

Euro zone

Sources: Datastream, Fed, ECB, Natixis

9

United States: Term deposits, sight deposits and bonds in banks’ liabilities (as % of GDP)

0

10

20

30

40

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

0

10

20

30

40 Term deposits (as % of GDP)

Sight deposits (as % of GDP)

Bonds in banks’ liabilities (as % of GDP)

Sources: Datastream, FoF, Natixis

10

United States: Structure of banks' assets(as % of GDP)

10

20

30

40

50

60

70

80

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

10

20

30

40

50

60

70

80

Long-term loans to companies* Mortgage loans to households* Short-term loans to companies* Short-term loans to households* Bonds in banks’ assets

Sources: Datastream, FoF, Natixis

(*) Liab ilities of economic agents’ balance sheet

11

Euro zone: Term deposits, sight deposits and bonds in banks’ liabilities (as % of GDP)

10

20

30

40

50

60

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

10

20

30

40

50

60 Term deposits Sight deposits Bonds

Sources: Datastream, ECB, Natixis

12

Euro zone: Structure of banks' assets (as % of GDP)

0

10

20

30

40

50

60

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

0

10

20

30

40

50

60

Long-term loans granted to companies Mortgage loans granted to households Short-term loans granted to companies Short-term loans granted to households Total bonds in banks’ assets

Sources: Datastream, ECB, Natixis

13

3. Financial market liquidity

Three concepts of liquidity

14

Interest rate on 10-year government bonds

0

10

20

30

40

50

02 03 04 05 06 07 08 09 10 11 12

2

4

6

8

10

12

14

16

18 Greece (LH scale) Spain (RH scale)

Italy (RH scale) Ireland (RH scale)

Portugal (RH scale)

Sources: Datastream, Natixis

15

Covered bond spread against swaps (in bp)

-100

0

100

200

300

400

500

02 03 04 05 06 07 08 09 10 11 12

-100

0

100

200

300

400

500 United Kingdom Germany

France Spain

Italy

Sources: iBoxx, Bloomberg, Natixis

16

Bank CDS and spread on senior debt of euro-zone banks against swaps

0

100

200

300

400

500

600

700

02 03 04 05 06 07 08 09 10 11 12

0

100

200

300

400

500

600

700 United States: Bank CDS Euro zone: Bank CDS Euro zone: Spread on senior bank debt against swaps

Sources: Bloomberg, iBoxx, Natixis

17

High-yield credit spread (asset swaps, bp)

0

200

400

600

800

1 000

1 200

1 400

1 600

02 03 04 05 06 07 08 09 10 11 12

0

200

400

600

800

1 000

1 200

1 400

1 600 United States

Euro zone

Sources: Datastream, iBoxx, Merrill Lynch, Natixis

18

BBB credit spread (asset swaps, bp)

0

100

200

300

400

500

600

700

02 03 04 05 06 07 08 09 10 11 12

0

100

200

300

400

500

600

700 United States

Euro zone

Sources: Datastream, iBoxx, Merrill Lynch, Natixis

19

Stock market indices (2002:1 = 100)

40

60

80

100

120

140

160

02 03 04 05 06 07 08 09 10 11 12

40

60

80

100

120

140

160 S&P Eurostoxx

Sources: Datastream, Natixis

20

Relationship # 1

Macroeconomic liquidity and bank liquidity

21

Monetary base (in local currency)

0

500

1 000

1 500

2 000

2 500

3 000

3 500

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

0

500

1 000

1 500

2 000

2 500

3 000

3 500 United States (USD bn)

Euro zone (EUR bn)

Sources: Datastream, Natixis

22

Banks' reserves at the central bank (in local currency)

0

200

400

600

800

1 000

1 200

1 400

1 600

1 800

2 000

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

0

200

400

600

800

1 000

1 200

1 400

1 600

1 800

2 000 United States (USD bn)

Euro zone (EUR bn)

Sources: Datastream, IMF, ECB, Natixis

23

United States: Households’ net purchases of Treasuriesand liquid and money-market assets (as % of GDP)

-9

-6

-3

0

3

6

9

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

-9

-6

-3

0

3

6

9 Treasuries Liquid and money-markets assets

Sources: Datastream, BEA, FoF, Natixis

24

United States: M2 money supply and net monthly household savings rate

0

2

4

6

8

10

12

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

0

2

4

6

8

10

12 Net monthly household savings rate

M2 money supply (Y/Y as %)

Sources: Datastream, BEA, Fed, Natixis

25

Bank loans to the private sector* (Y/Y as %)

-10

-5

0

5

10

15

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

-10

-5

0

5

10

15 United States

Euro zone

Sources: Datastream, Fed, ECB, Natixis

(*) Households + companies

26

Relationship # 2

Liquidity sought by non-banking economic agents and

transformation risk: who should be exposed to liquidity risk?

27

Outstanding bank loans to companies (as % of GDP)

10

20

30

40

50

60

70

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

10

20

30

40

50

60

70 United States

Euro zone

Sources: Datastream, FoF, ECB, Natixis

28

Outstanding bonds issued by non-financial companies (as % of GDP)

5

10

15

20

25

30

35

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

5

10

15

20

25

30

35 United States

Euro zone

Sources: Datastream, FoF, ECB, Natixis

29

Outstanding bonds of non-financial companies(in USD bn)

Investment Grade High Yield Euro zone 952 181 United States* 2,324 857

*Subject to minimum amount and maturitySources: Merrill - BoA, Natixis

30

Assets held by the Federal Reserve (USD bn)

US

Treasury securities

Federal agency

debt securities

Mortgage-backed

securities

Repurchase agreements

Term Auction Credit

Other loans

Commercial paper

Liquidity swaps

Other Federal Reserve assets

Total factors

supplying reserve funds

01/01/2008 718.35 0.00 0.00 29.39 50.00 0.03 0.00 24.00 43.65 916.19 01/02/2008 713.36 0.00 0.00 42.86 60.00 0.17 0.00 10.00 41.49 918.70 01/03/2008 628.98 0.00 0.00 84.82 80.00 33.48 0.00 0.00 43.41 921.26 01/04/2008 548.68 0.00 0.00 107.54 100.00 30.18 0.00 36.00 45.08 917.73 01/05/2008 491.06 0.00 0.00 105.04 150.00 28.34 40.819 62.00 43.71 930.95 01/06/2008 478.77 0.00 0.00 121.68 150.00 20.87 226.008 62.00 43.28 927.38 01/07/2008 479.17 0.00 0.00 113.71 150.00 17.64 249.91 62.00 44.99 947.18 01/08/2008 479.60 0.00 0.00 103.39 150.00 18.57 265.691 67.00 40.92 939.41 01/09/2008 476.56 3.71 0.00 111.71 150.00 187.75 282.197 135.23 40.98 1,186.17 01/10/2008 476.46 13.57 0.00 80.00 301.36 359.01 297.576 531.06 42.84 2,107.74 01/11/2008 476.42 12.26 0.00 80.00 406.51 283.18 308.518 479.44 39.97 2,144.35 01/12/2008 476.07 19.93 0.00 80.00 420.81 196.87 325.796 543.61 43.75 2,232.60 01/01/2009 475.20 26.67 6.82 17.14 415.86 150.01 316.2 465.85 44.21 2,044.63 01/02/2009 474.68 35.87 68.53 0.00 447.56 139.46 246.233 374.59 43.48 1,955.69 01/03/2009 474.73 48.80 236.96 0.00 468.59 134.34 240.802 327.69 49.02 2,106.57 01/04/2009 528.69 62.76 362.60 0.00 455.80 104.70 240.897 286.27 57.56 2,224.57 01/05/2009 597.58 79.75 430.90 0.00 372.54 124.23 154.694 184.93 70.67 2,131.13 01/06/2009 647.83 92.11 467.11 0.00 282.81 123.70 140.82 121.59 72.99 2,052.09 01/07/2009 695.32 104.07 544.51 0.00 237.63 108.53 94.414 87.74 78.79 2,065.80 01/08/2009 740.49 114.19 624.26 0.00 221.08 105.99 52.08 60.21 79.57 2,113.68 01/09/2009 762.75 126.89 689.23 0.00 196.02 111.07 42.82 59.12 85.13 2,191.00 01/10/2009 774.55 141.60 776.03 0.00 139.25 107.63 32.256 33.32 90.46 2,213.18 01/11/2009 776.53 153.63 854.87 0.00 101.01 108.48 15.042 25.81 90.84 2,248.83 01/12/2009 776.57 158.56 904.62 0.00 75.92 87.08 14.044 12.07 99.51 2,275.79

31

Assets held by the Federal Reserve (USD bn)

US

Treasury securities

Federal agency

debt securities

Mortgage-backed

securities

Repurchase agreements

Term Auction Credit

Other loans

Commercial paper

Liquidity swaps

Other Federal Reserve assets

Total factors

supplying reserve funds

01/01/2010 776.62 162.83 973.24 0.00 38.53 87.38 11.20 0.18 96.61 2,293.66 01/02/2010 776.56 165.99 1,032.74 0.00 15.43 87.21 7.72 0.00 94.97 2,328.43 01/03/2010 776.65 167.49 1,073.52 0.00 3.41 84.51 7.77 0.00 96.14 2,357.12 01/04/2010 776.72 168.90 1,099.76 0.00 0.00 78.08 6.56 0.00 96.94 2,375.60 01/05/2010 776.86 167.38 1,117.93 0.00 0.00 75.22 2.00 1.24 92.92 2,382.60 01/06/2010 776.96 165.70 1,128.42 0.00 0.00 69.43 1.00 1.25 94.79 2,387.47 01/07/2010 777.02 159.38 1,121.83 0.00 0.00 64.84 1.00 1.25 96.00 2,371.89 01/08/2010 782.83 156.91 1,111.42 0.00 0.00 57.88 0.00 0.04 92.18 2,353.75 01/09/2010 801.20 156.11 1,101.61 0.00 0.00 52.79 0.00 0.00 94.44 2,348.93 01/10/2010 834.28 150.18 1,059.45 0.00 0.00 47.84 0.00 0.06 99.08 2,342.45 01/11/2010 891.52 148.76 1,038.08 0.00 0.00 46.33 0.00 0.06 100.50 2,377.22 01/12/2010 1,010.29 147.46 1,001.43 0.00 0.00 45.11 0.00 0.08 111.61 2,467.29 01/01/2011 1,096.40 144.80 975.53 0.00 0.00 23.57 0.00 0.07 115.17 2,479.33 01/02/2011 1,201.40 144.15 958.38 0.00 0.00 21.91 0.00 0.07 115.33 2,565.35 01/03/2011 1,295.35 138.92 943.99 0.00 0.00 19.80 0.00 0.00 120.21 2,642.19 01/04/2011 1,406.55 127.81 930.57 0.00 0.00 17.21 0.00 0.00 126.32 2,731.92 01/05/2011 1,504.59 119.21 922.63 0.00 0.00 14.65 0.00 0.00 125.91 2,810.80 01/06/2011 1,589.17 118.37 914.43 0.00 0.00 13.16 0.00 0.00 131.24 2,886.79 01/07/2011 1,634.96 113.81 901.23 0.00 0.00 12.11 0.00 0.00 135.76 2,913.10 01/08/2011 1,647.86 109.90 892.48 0.00 0.00 11.76 0.00 0.50 130.62 2,902.77 01/09/2011 1,663.60 108.27 875.66 0.00 0.00 11.45 0.00 0.50 132.43 2,898.68 01/10/2011 1,670.91 107.67 858.17 0.00 0.00 11.10 0.00 1.85 140.18 2,893.32 01/11/2011 1,668.49 106.78 841.83 0.00 0.00 10.23 0.00 2.40 140.87 2,868.71 01/12/2011 1,671.44 104.60 847.76 0.00 0.00 9.11 0.00 99.82 153.08 2,980.66 01/01/2012 1,653.92 101.50 846.38 0.00 0.00 8.44 0.00 103.21 157.99 2,965.82 01/02/2012 1,665.02 101.50 836.02 0.00 0.00 8.14 0.00 108.76 163.27 2,974.11

Sources: Federal Reserve, Datastream, Natixis

32

Outstanding government bonds held by the central bank

400

600

800

1 000

1 200

1 400

1 600

1 800

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

0

50

100

150

200

250 United States (in USD bn, LH scale)

Euro zone (in EUR bn, RH scale)

Sources: Datastream, ECB, Natixis

33

United States: Outstanding ABS and liabilities of ABS issuers (in USD bn)

0

1 000

2 000

3 000

4 000

5 000

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

0

200

400

600

800

1 000

Outstanding ABS (LH scale)

Commercial paper in liabilities of ABS issuers (RH scale)

Sources: Datastream, FoF, Natixis

34

Interest rate margin on fixed-rate business loans against swap rates

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5 United States Euro zone

Sources: Datastream, Natixis

35

Interest rate margin on fixed-rate household loans against swap rates

-1

0

1

2

3

4

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

-1

0

1

2

3

4 United States Euro zone

Sources: Datastream, ECB, Natixis

36

Relationship # 3

Bank liquidity and market liquidity

37

Euro zone: Total outstanding repos(MRO + LTRO, in EUR bn)

100200

300400

500600

700800

9001000

11001200

02 03 04 05 06 07 08 09 10 11 12

100200

300400

500600

700800

9001000

11001200

Sources: Datastream, ECB, Natixis