Template-type: ReDIF-Paper 1.0
Author-Name: Dr. Lucas Marc Fuhrer
Author-Name-First: Lucas Marc
Author-Name-Last: Fuhrer
Author-Person: pfu165
Title: Liquidity in the Repo Market
Abstract: This paper examines liquidity in the Swiss franc repurchase (repo) market and assesses its determinants using a proprietary dataset ranging from 2006 to 2016. I find that repo market liquidity has a distinct intraday pattern, with low liquidity in early and late trading hours. Moreover, repo market liquidity is negatively affected by stress in the global financial system and the end of the minimum reserve requirement period if central bank reserves are scarce. Furthermore, I show that with excess central bank reserves in the financial system, quoted volumes in the interbank market get imbalanced towards more cash provider relative to cash taker quotes and the trading volume declines. By estimating liquidity in an interbank repo market and explaining its drivers, this paper contributes to the ongoing debate on repo market functioning.
Length: 46 pages
Creation-Date: 2017
Contact-Email: forschung@snb.ch
File-URL: https://www.snb.ch/en/publications/research/working-papers/2017/working_paper_2017_06
File-Format: text/html
Number: 2017-06
Classification-JEL: G01, G12, G21
Keywords: Repo market, liquidity, central bank reserves, Switzerland.
Handle: RePEc:snb:snbwpa:2017-06