The authors find that the use of Treasury securities to hedge mortgage-backed security extension risk may have magnified increases in long-term interest rates after the tightening of monetary policy in early 1994. Substantial increases in the duration of mortgage securities appear to have caused...

Repo rates for the most recently issued or "on-the-run" securities often diverge from general repo rates. The purpose of this study is to convey that relatively sizable divergences in repo rates for on-the-run issues are normal repeating events for the Treasury market, rather than evidence of...

We show that Treasury bill auction procedures create classes of price-equivalent discount rates for bills with less than 72 days to maturity. We argue that it is inefficient for market participants to bid at a discount rate that is not the minimum rate in its class. The inefficiency of bidding...

In April 1995, central banks in twenty-six countries conducted a global survey of the financial derivatives markets' size and structure. The authors' analysis of the survey results suggests that at the time of the survey, dealers in the aggregate assumed only small exposures to price risks in...

Securities loans collateralized by cash are by far the most popular form of securities-lending transaction. But when the cash collateral associated with these transactions is actively reinvested by a lender’s agent, potential risks emerge. This study argues that the standard compensation...

Eliminating the federal budget deficit, even assuming a correspondingly higher national rate, is likely to yield only a modest reduction in the U.S. international trade deficit. Balancing the federal budget will help improve the trade balance through the effects of lower levels of aggregate...

The econometrics literature contains many alternative measures of goodness of fit, roughly analogous to R2, for use with equations with dichotomous dependent variables. There is, however, no consensus as to the measures' relative merits or about which ones should be reported in empirical work....