Liquidity in the Repo Market

Lucas Fuhrer

No 2017-06, Working Papers from Swiss National Bank

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.

Keywords: Repo market; liquidity; central bank reserves; Switzerland. (search for similar items in EconPapers)
JEL-codes: G01 G12 G21 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2017
New Economics Papers: this item is included in nep-fmk, nep-mon and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Liquidity in the repo market (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:snb:snbwpa:2017-06

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