**Sterling Money Markets: October Tightening Likely a One-Off**
*By Michiel Tukker, Senior European Rates Strategist*
Sterling money markets experienced a significant tightening in October, a movement largely explained by a rotation away from Covid-related funding towards the Bank of England’s liquidity facilities. As a result, the spread on short-dated commercial paper peaked well above projected year-end 2024 levels.
**Outlook for November and Year-End**
Looking ahead to November, we expect market conditions to ease. However, there’s a risk that further tightening could occur as we approach year-end. This is primarily due to the uneven distribution of reserves among banks, which can amplify liquidity stresses during key calendar periods.
**Understanding October’s Tightening**
While the recent tightening was considerable, our analysis suggests this was a one-off event. The shift reflects a transition in funding sources rather than a structural change in the market, indicating that similar conditions are unlikely to persist in the near term.
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*About the Author:*
Michiel Tukker is a Senior European Rates Strategist at ING.
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