Bidding Behavior in the SNB's Repo Auctions

Sébastien Kraenzlin and Martin Schlegel



JEL classification
D44, E52, E58

Open Market Operations, Bidding Behavior, FixedRate Tender Auction, Repo, Switzerland


The Swiss National Bank (SNB) provides reserves to market participants via fixed rate tender auctions. We analyze the banks' bidding behavior and identify the determinants for the decision to participate as well as on the amount to tender. Therefore, we estimate bidding functions for banks which participate regularly in the SNB's auctions. We find that a bank's bids from the previous day and the amount of maturing repo operations with the SNB have for most banks a significant effect. The autonomous factors (government balances at the SNB and currency in circulation) are of only minor importance. A further determinant of the bidding behavior is the attractiveness of the SNB's auction rate compared to the prevailing interbank market repo rate. The spread of unsecured and repo rates as well as the attractiveness of funding Euros indirectly via a Swiss franc repo transaction with the SNB are only for few banks significant. Further, the question is addressed whether the bidding behavior changed in the financial market crisis of 2007/2008. There is little evidence of a systematic change in bidding behavior in the crisis. This results from the fact that the SNB has addressed the volatile demand for reserves in the crisis with overnight fine-tuning operations.