Summary

• ‍‍ESTR settlements relative to the ECB deposit rate have edged higher since the spring, with the latest increase being the result of the 'big bank premium' having vanished;
• With the ECB destroying bank reserves through ongoing Quantitative Tightening and TLTRO repayments, ESTR settlements will continue to increase relative to ECB rates. Perhaps the increases can be turbo-charged because of arcane dynamics on the ECB balance sheet. This being euro money markets, turbo-charged is a relative term, of course;
• The spread between overnight general collateral repo and the ECB deposit rate continues to narrow. As per my model, the spread should be erased by the turn of the year.