Echoes from the Money Markets | Q2 2026 

What recent indicators tell us about rates, liquidity and market activity 

Note: Unless otherwise indicated, charts and market indicators in this section reflect data available as of 3 June 2026. 

Recent developments point to three themes: changing inflation and monetary policy expectations, ample liquidity conditions and continued activity across short-term funding markets. 

While expectations around inflation and interest rates have evolved significantly in recent months, liquidity conditions and market activity have remained broadly resilient. 

Inflation and rate expectations continue to evolve 

Since March, markets have reassessed the outlook for inflation and monetary policy. 

The Euribor curve has steepened significantly since March. Following the ECB's 25 basis point rate hike in June, markets continue to price in further policy tightening. At the same time, short-term interest rate volatility rose sharply following geopolitical tensions in the Middle East before gradually easing. Inflation expectations have also evolved differently across regions, with euro area expectations remaining elevated while US expectations have moved closer to pre-conflict levels.  

📊 Chart 1 – Euro area and US inflation expectations (5Y5Y Forward Rates) 

Liquidity remains ample 

Despite evolving market expectations, liquidity conditions remain abundant. 

As of 3 June 2026, excess liquidity stood at EUR 2.20 trillion, while the ECB balance sheet totalled EUR 5.72 trillion, down from its peak of EUR 8.8 trillion in June 2022. The composition of the balance sheet has also evolved, with the share of gold increasing as a result of higher gold prices. 

While the Eurosystem balance sheet continues to normalise, liquidity levels are still elevated. 

📊 Chart 2 – Euro area key interest rates and excess liquidity trends 

Activity remains strong across short-term funding markets 

Activity across short-term funding markets continues at a sustained pace. 

STEP outstanding amounts stood at EUR 584 billion at the end of May, broadly unchanged compared with recent months. At the same time, OIS trading volumes increased significantly during the second maintenance period of 2026 as markets reassessed the monetary policy outlook. Spot OIS activity recorded its highest level in five years. 

These developments reflect continued activity across short-term funding markets despite increased market uncertainty. 

📊 Chart 3 – OIS trading volumes and interest rate expectations 

Aggregated Euribor volumes reached EUR 172 billion in May 2026, decreasing by EUR 4 billion compared with the previous month. Volumes remain broadly in line with recent months. 

📊 Chart 4 – Euribor transaction volumes 

Chart 5 – Wholesale secured volumes 

Market indicators at a glance 

Euribor rates 

Since early March, the Euribor curve has steepened significantly. Following the ECB's 25 basis point rate hike in June, markets continue to anticipate additional monetary tightening.  

📊 Chart 6 – Euribor curve developments since March 2026 

MMSR and Euribor 

3M Euribor and 3M MMSR rates have continued to move closely together throughout the period under review. During the second maintenance period of 2026, the difference between the two averaged around 4 basis points. 

📊 Chart 7 – 3M Euribor and 3M MMSR rate comparison 

Short-term rate volatility 

Short-term interest rate volatility increased sharply following geopolitical tensions in the Middle East. The 1M1Y swaption on 3M Euribor rose from around 21 basis points at the end of February to approximately 150 basis points in March before declining towards 70 basis points by June. 

📊 Chart 8 – Short-term interest rate volatility (1M1Y Swaption) 

STEP market 

Total STEP outstanding amounts reached EUR 584 billion on 29 May 2026. Outstanding volumes continue to be driven primarily by monetary financial institutions (MFIs) and have remained relatively stable since December 2025. 

📊 Chart 9 – STEP outstanding amounts by sector