European Central Bank's overnight loans drop to zero, with €222 trillion in deposits as markets hoard cash to cope with uncertainty

⑴ Data released by the European Central Bank on Thursday show that financial institutions did not borrow any funds through the overnight lending facility, with usage at zero, compared to 1 million euros on the previous trading day. Meanwhile, usage of the overnight deposit facility rose to 2,221.687 billion euros, higher than the previous trading day’s 2,196.400 billion euros. ⑵ Current account holdings stand at 169.058 billion euros, a slight decrease from 172.594 billion euros on the previous trading day. The size of the deposit facility far exceeds that of the lending facility, reflecting financial institutions’ preference to park excess liquidity at the European Central Bank to earn returns rather than lending it out or taking on credit risk. ⑶ From a trading sentiment perspective, the zero demand for overnight lending combined with the continued growth of deposit holdings indicates that market participants are actively shrinking their balance sheets and have a strong preference for holding cash. Coupled with global trade concerns triggered by Trump’s tariff comments, funds are opting to stay on the sidelines rather than being allocated to risk assets, and the market as a whole remains defensive.