Bidding behaviour in the ECB’s main refinancing operations during the financial crisis

Liquidity provision through its repo auctions has been one of the main instrumentsof the European Central Bank (ECB) to address the recent tensions infinancial markets since summer 2007. In this paper, we analyse banks’ biddingbehaviour in the ECB’s main refinancing operations (MROs) during the ongoingturmoil in money and financial markets. We employ a unique data set comprisingrepo auctions from March 2004 to October 2008 with bidding data from 877counterparties. We find that increased bid rates during the turmoil can be explainedby, inter alia, the increased individual refinancing motive, the increasedattractiveness of the ECB’s tender operations...