EuroMTS today announced the introduction of the reference market for European Treasury bills, with the aim of setting benchmark standards and creating a single point of access to concentrate liquidity and to increase visibility for short term paper.
In keeping with the MTS model, Euro Benchmark Treasury bills are offered via a parallel listing on the EuroMTS Benchmark Treasury bills Market, as well as on their respective MTS domestic markets, ensuring the deepest possible market for Treasury bills.
“We are extremely pleased to be able to expand the market for European benchmark securities and to better structure the Euro Treasury bills sector,” says Gianluca Garbi, chief executive officer of EuroMTS Ltd. “EuroMTS, which has been instrumental in building liquid benchmark bonds, thus reducing the funding cost for issuers, now offers similar liquidity and efficiencies to shorter dated securities.”
In order to be eligible for listing, Treasury bills are required to be EUR1 billion or more, issued or tapped in the previous 60 days. Three buckets have been defined, including a 3-month bucket (11-13 weeks), a 6-month bucket (24-28 weeks) and a 12-month bucket (47-55 weeks). Initial issuers include France, Germany, Italy and Spain. Other countries may join in the future.
Eleven market makers and three market takers have at the outset agreed to provide liquidity. With no additional membership fee for existing EuroMTS members, more participants are expected to join in supporting the new market. Participants may act as European Treasury bill Specialists (will quote all EuroMTS Benchmark Treasury bills), Single Market Treasury bill Specialists (will quote bills of at least one eligible issuer) and as Price Takers (can lift prices, but not insert quotes).
“In a recent study, we found that when Treasury bills are subject to regular issuance and traded through a centralized, transparent electronic limit order book, such as that of MTS, their liquidity rises and the yield demanded by investors significantly declines,” says Bruno Biais, Director of Research at the Institut d’Economie Industrielle. “Further, our results suggest that concentrating Treasury bill issues into a smaller number of benchmarks, issued in regular amounts, would benefit governments in that it would enhance liquidity, resulting in a corresponding reduction in their funding costs.”