ECB Jumbo Hike Isn’t Feeding Through to Market Rates Fast Enough

A shortage of high-quality assets in the euro area is keeping a lid on short-term borrowing costs, a development that could endanger the European Central Bank’s effort to tighten financial conditions.

The cost of borrowing cash against German government bonds in repo markets, where dealers and funds look for short-term financing, has only climbed 57 basis points since the ECB’s decision to raise rates by 75 basis points last week, according to data from Commerzbank AG.