Global Markets Analyst

Latest edition · October 2, 2026

Global Markets Analyst ECB Reserves Entering the Grey Zone

As ECB quantitative tightening drains excess reserves toward EUR2tn, reserve levels are likely already entering the range of equilibrium bank demand. Combined with acute sovereign spread widening and EGB cheapening, this raises the likelihood that the ECB may need to recalibrate its balance sheet policy earlier than scheduled.

Goldman Sachs analyzes the outlook for Euro area central bank liquidity as ECB QT drains reserves at a pace of EUR40bn per month toward EUR2tn. Both bank survey evidence and revealed balance sheet behaviour (such as LCR dynamics and sovereign bond substitution within HQLA) indicate that excess reserves are nearing equilibrium demand levels. Because liquidity demand is state-contingent and spikes during periods of volatility, and because QT accounts for roughly 40% of net bond supply to the public—pushing EGB convenience yields to historic lows—broader market stress rather than money market rate spikes could compel the ECB to stabilise reserves and recalibrate QT ahead of schedule.

Key takeaways from the latest edition

• 1.Excess reserves in the Euro area are approaching EUR2tn, entering the plausible range of equilibrium demand, which warrants caution given that reserve demand increases during periods of volatility.
• 2.ECB quantitative tightening has magnified the cheapening of sovereign bonds relative to swaps across European government bond (EGB) markets, with QT representing roughly 40% of net bond supply to the public.
• 3.Reserve stabilisation and a potential recalibration of ECB balance sheet policy may arrive sooner than anticipated, despite earlier plans for structural bond purchases to conclude last in the normalisation process.

What this series covers

• ECB Reserves Entering the Grey Zone
• How much of a liquidity buffer?
• Whither QT?
• Market implications

Edition archive

• Global Markets Analyst ECB Reserves Entering the Grey Zone

  October 2, 2026

• Global Markets Analyst Banishing the Bound in Japan

  October 1, 2026

• Global Markets Analyst FX Positioning—Fading Extremes in a Low Vol Regime

  September 30, 2026

• Global Markets Analyst EM Rates — Pull from Home, Push from Abroad

  August 14, 2026