Repo auction formats, bidders' behaviour and money market response in India

The treasury securities repo-auction is an important instrument for central banks in managing liquidity and sending interest rate signal to the money market. In the Indian context, the repo-auctions have been used actively in the post-reform period. The present study illustrates the money market reaction to repo-auctions and points out whether such reaction is consistent with applied auction rules. The policy implications are analysed in the light of alternative rules pertaining to discriminatory price auctions and fixed rate repos.