Danske Bank's analysts note that the Euro area banks decided to take EUR3.4bn in TLTRO3.1 operations today and was markedly lower than expected (also lower than Danske’s below-market consensus of EUR20-30bn), however, it will not impact the loose liquidity standards.

• “The low liquidity take-up needs to be seen in the context of changed terms last week where the ECB decided that the quarterly operations running until March 2021 should be each of 3-year maturity but also sweetened the rate by 10bp (now from MRO to deposit rate).
• Today's operation cannot be rolled into the 7 th and last operation in March 2021, as the early repayment optionality in today's operation only falls in September 2021. That may also have been a reason for the low take up. However, we expect the ECB to extend the TLTROs as we believe it is an underappreciated and uncontroversial tool.
• The maximum potential take up of 30% of eligible lending leaves more space in core countries than in peripheral countries. We estimate that on a banking system level, German banks would be able to take up to EUR368bn over the 7 operations. Similarly, Italian and Spanish banks could take up to EUR43bn and EUR44bn respectively.”