Macroeconomic liquidity, bank
liquidity, market liquidity
Patrick ARTUS
AFGAP - PRMIA - Scientific Committee
Annual Conference on Liquidity
Paris – April 5, 2012
Three concepts of liquidity
1. Macroeconomic liquidity
2
Monetary base (as % of GDP)
20
United States
20
Euro zone
15
15
10
10
5
5
0
Sources: Datastream, central banks, Natixis
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
3
0
Liquid and money-market assets held by companies
(as % of GDP)
25
United States
25
Euro zone
20
20
15
15
10
10
5
5
0
Sources: FoF, ECB, Natixis
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
4
0
United States: Outstanding assets held by households
(as % of GDP)
Equities
Life insurance and pension funds
Total bonds
Liquid and money-markets assets
120
120
100
100
80
80
60
60
40
40
20
20
Sources: Datastream, FoF, Natixis
0
0
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
5
Euro zone: Assets held by households
(in value terms, as % of GDP)
Equities
Life insurance and pension funds
Total bonds
Liquid and money-markets assets
80
80
70
70
60
60
50
50
40
40
30
30
20
20
10
10
0
Sources: Datastream, ECB, Natixis
99 00 01 02 03 04 05 06 07 08 09 10 11 12
6
0
Three concepts of liquidity
2. Bank liquidity
7
Bank’s reserves at the central bank
(as% of GDP)
20
United States
20
Euro zone
15
15
10
10
5
5
Sources: Datastream, Fed, ECB, Natixis
0
0
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
8
United States: Term deposits, sight deposits and
bonds in banks’ liabilities (as % of GDP)
40
Term deposits (as % of GDP)
40
Sight deposits (as % of GDP)
Bonds in banks’ liabilities (as % of GDP)
30
30
20
20
10
10
0
Sources: Datastream, FoF, Natixis
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
9
0
United States: Structure of banks' assets
(as % of GDP)
80
70
Long-term loans to companies*
Short-term loans to companies*
Bonds in banks’ assets
Mortgage loans to households*
Short-term loans to households*
80
70
(*) Liab ilities of economic agents’
b alance sheet
60
60
50
50
40
40
30
30
20
Sources: Datastream, FoF, Natixis
10
10
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
10
20
Euro zone: Term deposits, sight deposits and bonds in
banks’ liabilities (as % of GDP)
60
Term deposits
Sight deposits
Bonds
60
50
50
40
40
30
30
20
20
10
Sources: Datastream, ECB, Natixis
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
11
10
Euro zone: Structure of banks' assets
(as % of GDP)
Long-term loans granted to companies
Short-term loans granted to companies
Total bonds in banks’ assets
Mortgage loans granted to households
Short-term loans granted to households
60
60
50
50
40
40
30
30
20
20
10
Sources: Datastream, ECB, Natixis
0
0
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
12
10
Three concepts of liquidity
3. Financial market liquidity
13
Interest rate on 10-year government bonds
50
Greece (LH scale)
Spain (RH scale)
Italy (RH scale)
Ireland (RH scale)
18
16
Portugal (RH scale)
40
14
12
30
10
20
8
6
10
4
Sources: Datastream, Natixis
0
02
14
03
04
05
06
07
08
09
10
11
12
2
Covered bond spread against swaps (in bp)
500
400
United Kingdom
Germany
France
Italy
Spain
500
400
300
300
200
200
100
100
0
0
Sources: iBoxx, Bloomberg, Natixis
-100
02
15
03
04
05
06
07
08
09
10
11
12
-100
Bank CDS and spread on senior debt of euro-zone
banks against swaps
United States: Bank CDS
Euro zone: Bank CDS
Euro zone: Spread on senior bank debt against swaps
700
700
600
600
500
500
400
400
300
300
200
200
Sources: Bloomberg, iBoxx, Natixis
100
100
0
0
02
16
03
04
05
06
07
08
09
10
11
12
High-yield credit spread (asset swaps, bp)
United States
1 600
1 600
Euro zone
1 400
1 400
1 200
1 200
1 000
1 000
800
800
600
600
400
400
200
200
Sources: Datastream, iBoxx, Merrill Lynch, Natixis
0
02
17
03
04
05
06
07
08
09
10
11
12
0
BBB credit spread (asset swaps, bp)
United States
700
700
Euro zone
600
600
500
500
400
400
300
300
200
200
100
100
Sources: Datastream, iBoxx, Merrill Lynch, Natixis
0
02
18
03
04
05
06
07
08
09
10
11
12
0
Stock market indices (2002:1 = 100)
160
160
Eurostoxx
S&P
140
140
120
120
100
100
80
80
60
60
Sources: Datastream, Natixis
40
02
19
03
04
05
06
07
08
40
09
10
11
12
Relationship # 1
Macroeconomic liquidity
and bank liquidity
20
Monetary base (in local currency)
3 500
3 500
United States (USD bn)
Euro zone (EUR bn)
3 000
3 000
2 500
2 500
2 000
2 000
1 500
1 500
1 000
1 000
500
500
0
Sources: Datastream, Natixis
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
21
0
Banks' reserves at the central bank
(in local currency)
2 000
United States (USD bn)
2 000
1 800
Euro zone (EUR bn)
1 800
1 600
1 600
1 400
1 400
1 200
1 200
1 000
1 000
800
800
600
600
400
Sources: Datastream, IMF, ECB, Natixis
200
200
0
0
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
22
400
United States: Households’ net purchases of Treasuries
and liquid and money-market assets (as % of GDP)
Treasuries
Liquid and money-markets assets
9
9
6
6
3
3
0
0
-3
-3
-6
-6
-9
Sources: Datastream, BEA, FoF, Natixis
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
23
-9
United States: M2 money supply and net monthly
household savings rate
12
Net monthly household savings rate
12
M2 money supply (Y/Y as % )
10
10
8
8
6
6
4
4
2
2
0
Sources: Datastream, BEA, Fed, Natixis
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
24
0
Bank loans to the private sector* (Y/Y as %)
15
United States
15
Euro zone
10
10
5
5
0
0
-5
-10
(*) Households + companies
Sources: Datastream, Fed, ECB, Natixis
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
25
-5
-10
Relationship # 2
Liquidity sought by non-banking
economic agents and
transformation risk: who should
be exposed to liquidity risk?
26
Outstanding bank loans to companies
(as % of GDP)
70
United States
Euro zone
70
60
60
50
50
40
40
30
30
20
20
Sources: Datastream, FoF, ECB, Natixis
10
10
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
27
Outstanding bonds issued by non-financial companies
(as % of GDP)
35
United States
35
Euro zone
30
30
25
25
20
20
15
15
10
Sources: Datastream, FoF, ECB, Natixis
5
5
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
28
10
Outstanding bonds of non-financial companies
(in USD bn)
Euro zone
United States*
Investment Grade
952
2,324
*Subject to minimum amount and maturity
Sources: Merrill - BoA, Natixis
29
High Yield
181
857
Assets held by the Federal Reserve (USD bn)
30
US
Treasury
securities
Federal
agency
debt
securities
Mortgagebacked
securities
Repurchase
agreements
Term
Auction
Credit
Other
loans
Commercial
paper
Liquidity
swaps
Other
Federal
Reserve
assets
Total
factors
supplying
reserve
funds
01/01/2008
01/02/2008
01/03/2008
01/04/2008
01/05/2008
01/06/2008
01/07/2008
01/08/2008
01/09/2008
01/10/2008
01/11/2008
01/12/2008
718.35
713.36
628.98
548.68
491.06
478.77
479.17
479.60
476.56
476.46
476.42
476.07
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
3.71
13.57
12.26
19.93
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
29.39
42.86
84.82
107.54
105.04
121.68
113.71
103.39
111.71
80.00
80.00
80.00
50.00
60.00
80.00
100.00
150.00
150.00
150.00
150.00
150.00
301.36
406.51
420.81
0.03
0.17
33.48
30.18
28.34
20.87
17.64
18.57
187.75
359.01
283.18
196.87
0.00
0.00
0.00
0.00
40.819
226.008
249.91
265.691
282.197
297.576
308.518
325.796
24.00
10.00
0.00
36.00
62.00
62.00
62.00
67.00
135.23
531.06
479.44
543.61
43.65
41.49
43.41
45.08
43.71
43.28
44.99
40.92
40.98
42.84
39.97
43.75
916.19
918.70
921.26
917.73
930.95
927.38
947.18
939.41
1,186.17
2,107.74
2,144.35
2,232.60
01/01/2009
01/02/2009
01/03/2009
01/04/2009
01/05/2009
01/06/2009
01/07/2009
01/08/2009
01/09/2009
01/10/2009
01/11/2009
01/12/2009
475.20
474.68
474.73
528.69
597.58
647.83
695.32
740.49
762.75
774.55
776.53
776.57
26.67
35.87
48.80
62.76
79.75
92.11
104.07
114.19
126.89
141.60
153.63
158.56
6.82
68.53
236.96
362.60
430.90
467.11
544.51
624.26
689.23
776.03
854.87
904.62
17.14
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
415.86
447.56
468.59
455.80
372.54
282.81
237.63
221.08
196.02
139.25
101.01
75.92
150.01
139.46
134.34
104.70
124.23
123.70
108.53
105.99
111.07
107.63
108.48
87.08
316.2
246.233
240.802
240.897
154.694
140.82
94.414
52.08
42.82
32.256
15.042
14.044
465.85
374.59
327.69
286.27
184.93
121.59
87.74
60.21
59.12
33.32
25.81
12.07
44.21
43.48
49.02
57.56
70.67
72.99
78.79
79.57
85.13
90.46
90.84
99.51
2,044.63
1,955.69
2,106.57
2,224.57
2,131.13
2,052.09
2,065.80
2,113.68
2,191.00
2,213.18
2,248.83
2,275.79
Assets held by the Federal Reserve (USD bn)
US
Treasury
securities
Federal
agency
debt
securities
Mortgagebacked
securities
01/01/2010
01/02/2010
01/03/2010
01/04/2010
01/05/2010
01/06/2010
01/07/2010
01/08/2010
01/09/2010
01/10/2010
01/11/2010
01/12/2010
776.62
776.56
776.65
776.72
776.86
776.96
777.02
782.83
801.20
834.28
891.52
1,010.29
162.83
165.99
167.49
168.90
167.38
165.70
159.38
156.91
156.11
150.18
148.76
147.46
01/01/2011
01/02/2011
01/03/2011
01/04/2011
01/05/2011
01/06/2011
01/07/2011
01/08/2011
01/09/2011
01/10/2011
01/11/2011
01/12/2011
1,096.40
1,201.40
1,295.35
1,406.55
1,504.59
1,589.17
1,634.96
1,647.86
1,663.60
1,670.91
1,668.49
1,671.44
01/01/2012
01/02/2012
1,653.92
1,665.02
Total
factors
supplying
reserve
funds
11.20
7.72
7.77
6.56
2.00
1.00
1.00
0.00
0.00
0.00
0.00
0.00
0.18
0.00
0.00
0.00
1.24
1.25
1.25
0.04
0.00
0.06
0.06
0.08
96.61
94.97
96.14
96.94
92.92
94.79
96.00
92.18
94.44
99.08
100.50
111.61
2,293.66
2,328.43
2,357.12
2,375.60
2,382.60
2,387.47
2,371.89
2,353.75
2,348.93
2,342.45
2,377.22
2,467.29
23.57
21.91
19.80
17.21
14.65
13.16
12.11
11.76
11.45
11.10
10.23
9.11
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.07
0.07
0.00
0.00
0.00
0.00
0.00
0.50
0.50
1.85
2.40
99.82
115.17
115.33
120.21
126.32
125.91
131.24
135.76
130.62
132.43
140.18
140.87
153.08
2,479.33
2,565.35
2,642.19
2,731.92
2,810.80
2,886.79
2,913.10
2,902.77
2,898.68
2,893.32
2,868.71
2,980.66
8.44
8.14
0.00
0.00
103.21
108.76
157.99
163.27
2,965.82
2,974.11
Repurchase
agreements
Other
loans
Commercial
paper
973.24
1,032.74
1,073.52
1,099.76
1,117.93
1,128.42
1,121.83
1,111.42
1,101.61
1,059.45
1,038.08
1,001.43
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
38.53
15.43
3.41
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
87.38
87.21
84.51
78.08
75.22
69.43
64.84
57.88
52.79
47.84
46.33
45.11
144.80
144.15
138.92
127.81
119.21
118.37
113.81
109.90
108.27
107.67
106.78
104.60
975.53
958.38
943.99
930.57
922.63
914.43
901.23
892.48
875.66
858.17
841.83
847.76
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
101.50
101.50
846.38
836.02
0.00
0.00
0.00
0.00
Sources: Federal Reserve, Datastream, Natixis
31
Liquidity
swaps
Other
Federal
Reserve
assets
Term
Auction
Credit
Outstanding government bonds held
by the central bank
1 800
United States (in USD bn, LH scale)
250
Euro zone (in EUR bn, RH scale)
1 600
200
1 400
1 200
150
1 000
100
800
600
400
50
Sources: Datastream,
ECB, Natixis
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
32
0
United States: Outstanding ABS and liabilities of ABS
issuers (in USD bn)
Outstanding ABS (LH scale)
5 000
Commercial paper in liabilities of ABS issuers (RH scale)
4 000
800
3 000
600
2 000
400
1 000
200
0
Sources: Datastream, FoF, Natixis
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
33
1 000
0
Interest rate margin on fixed-rate business
loans against swap rates
3,5
United States
Euro zone
3,0
3,0
2,5
2,5
2,0
2,0
1,5
1,5
1,0
1,0
0,5
0,5
0,0
Sources: Datastream, Natixis
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
34
3,5
0,0
Interest rate margin on fixed-rate household
loans against swap rates
4
United States
Euro zone
3
3
2
2
1
1
0
0
-1
Sources: Datastream, ECB, Natixis
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
35
4
-1
Relationship # 3
Bank liquidity and
market liquidity
36
Euro zone: Total outstanding repos
(MRO + LTRO, in EUR bn)
1200
1100
1000
900
800
700
600
500
400
300
200
100
Sources: Datastream, ECB, Natixis
02
37
03
04
05
06
07
08
09
10
11
12
1200
1100
1000
900
800
700
600
500
400
300
200
100