The growth of Europe’s repo market is stalling despite the “extraordinary” level of excess liquidity triggered by quantitative easing (QE) programmes, according to a survey by the International Capital Markets Association (ICMA).

The ICMA estimated the European repo market’s overall size to be more than €5.6trn, as at 10 June – a “very small” 2% increase from the €5.5trn reported in December 2014.

But Godfried De Vidts, chairman of the ICMA’s European Repo Council, said this figure failed to “tell the whole story”, and that the European market was not growing in line with underlying conditions.

He added: “Increased bond issuance, extraordinary excess liquidity from [the European Central Bank’s long-term refinancing operation] and QE, and increasing demand for collateral driven by regulation might reasonably have been expected to produce an increase in repo trading.”

He said upcoming research would provide a better understanding of the “profound” changes underlying the aggregate figures, which show increases and declines of around 2% on a six-monthly basis over the last year.

According to the ICMA, the trend in European repo activity is “still essentially sideways”.

The ICMA’s 29th European repo market survey also noted a decline in EU fixed income being used as collateral, down 4.5 percentage points to 77%.

The association attributed the reduction to an increased use of non-government bonds, as well as equity, as collateral.

It added: “It may reflect a focus – albeit temporary – on higher-margin business and is likely to be related to the drop in the share of electronic trading.”