Recurring debt ceiling standoffs cause political disruptions and economic costs. We quantify one type of cost which is receiving growing attention: the spillover to short-term funding markets. Using high-frequency aggregate as well as granular money market fund specific data, we find that flows...

This paper examines the existence and magnitude of an "LCR premium" in Peru's interbank market by exploiting the July 1, 2019 reform that eliminated the punitive outflow weights on repo collateral under the Liquidity Coverage Ratio (LCR). Using daily transactions from January 2019 to February...

We analyze the international dimension of repo markets using novel euro area regulatory microdata. Our findings highlight the deep integration of funding markets across the Atlantic and the US dollar's outsized role. Our paper documents five key facts: (1) US dollar repos by euro area entities...

This paper studies how Treasury market dynamics depend on adjustments to the central bank balance sheet. We introduce a dynamic model of Treasury bonds with traditional and shadow banks. In the model, both Treasury and repo market disruptions arise as a joint consequence of three frictions: (i)...

The purpose of this paper is to identify the changes in the stock market prices of banks in India with changes in FED rates in long run.Using both bivariate granger causality and ANOVA along with binomial logistic regression the influence of changes in FED rates on stock market prices of both...

I provide the first systematic analysis of collateral choices in one of the main short-term funding markets, the repurchase agreement (repo) market. In repos, long-term bonds serve as collateral connecting short-term and long-term funding markets. In general collateral repos, banks can choose...

The reuse of collateral can support the efficient allocation of safe assets in the financial system. Exploiting a novel dataset, we show that banks substantially increase their reuse of sovereign bonds in response to scarcity induced by Eurosystem asset purchases. While repo rates react little...

The Eurosystem's asset purchase programmes reduced the free float of German Bunds. Market participants feared impaired market functioning in the Bund market and monetary policymakers unintended consequences for monetary policy transmission. We study the intended and unintended consequences of...

As of 7 October 2024, the EU offers its Primary Dealers the possibility to source specific EU-Bonds on a temporary basis through its EU Repurchase Agreement (Repo) Facility. The facility will support EU Primary Dealers in posting firm and public quotes on EU-Bonds so that investors can be...

This article seeks to connect today's inflation with one of the least studied and understood creations of the Federal Reserve - the repurchase (repo) market. Despite decades of existence, it is only in the last few years that the repo market has ceased to function smoothly, experiencing first a...

This paper evaluates the salient forces behind a dealer-intermediary's decision to move a bilateral repo transaction with a customer into central clearing. We provide evidence that dealers turn to sponsored repo on occasions when balance sheet space is scarce, such as when there is a large...

The introduction of the Securities Financing Transactions Regulation into EU law provides a unique opportunity to obtain an in-depth understanding of repo markets. Based on the transaction-level data reported under the regulation, this paper presents an overview and key facts about the euro area...

We construct the first measure of collateral re-use at the bank and bond level for the European repo market using a regulatory transaction dataset. We show that banks materially increase the rate of re-use in response to tightened asset scarcity induced by the Eurosystem's asset purchase...

In 2022, US financial regulators proposed to mandate a single central clearing mechanism for treasury bonds and repo transactions to stabilize financial markets. The systemic risks inherent in repo markets were first highlighted by the global financial crisis and, as a response, global financial...

Using microdata on stock-level lending positions from German mutual funds, we show that active funds use the equity lending market to obtain information about short sale demand. Funds reduce long positions in response to these demand signals, which allows fund managers to front-run public...

The reuse of collateral can support the efficient allocation of assets in the financial system. Exploiting a novel dataset, we quantify banks’ collateral reuse at the security level. We show that banks substantially increase their reuse of collateral in response to scarcity induced by central...

This paper investigates both the magnitude and the drivers of bank window dressing behaviour in euro-denominated repo markets. Using a confidential transaction-level data set, our analysis illustrates that banks engineer an economically sizeable contraction in their repo transactions around...

On March 31, 2020, amidst historically severe strains in the US Treasury market and global dollar funding markets, the Federal Reserve announced the Foreign and International Monetary Authorities (FIMA) Repo Facility. The FIMA Repo Facility was designed to discourage foreign official Treasury...

The collapse of Lehman Brothers in September 2008 led to a severe liquidity crisis in Hungary, which is part of the European Union but does not use the euro. Hungary’s banking system was vulnerable to short-term liquidity withdrawals by foreign banks. In October 2008, the Hungarian central...

We develop a quantity-driven general equilibrium model that integrates the term structure of interest rates with the repurchase agreements (repo) market to shed light on the com-bined effects of quantitative easing (QE) on the bond and money markets. We characterize in closed form the endogenous...

More widespread central clearing could enhance dealers’ ability to intermediate financial markets by increasing the netting of buy and sell trades, thereby reducing the impact of trading on balance sheets and capital ratios. Drawing on trade‑level regulatory data, we study the netting...

We study passive funds' conflicts of interest by examining their securities lending decisions. We show that passive funds' lending varies with the costs of lending for their families. Passive funds are less likely to lend a security if (i) active funds in their families have a sizable stake in...

It's well-known that regulation can have profound effects on asset prices and market fragmentation. Yet existing evidence is very thin. We contribute by assessing the effects of Basel III on financial market fragmentation using the UK repo market as an important case study. Evidence is...

We construct the first measure of collateral re-use at the bank and bond level for the European repo market using a regulatory transaction dataset. We show that banks materially increase the rate of re-use in response to tightened asset scarcity induced by the Eurosystem’s asset purchase...