The temporary LTROs announced in mid-March provided banks with funding at the deposit facility rate in order to bridge liquidity needs until the settlement of this month’s TLTRO. These operations provided an effective liquidity backstop, helping to safeguard the smooth functioning of money markets.
However, some managers are adopting so-called “enhanced” index strategies, which may entail positions on various parts of the curve or allow investments in subsets of commodities.2 ETF sponsors have also diversified their investment strategies. ETF sponsors, especially in the case of ETFs linked to the price of precious metals, typically take long positions in commodity spot markets under so-called physical ETF schemes.