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Demand in the Repo Market: Indirect Perspectives from Open Market Operations from 2006 to 2020

Chris Becker, Anny Francis, Calebe de Roure and Brendan Wilson
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Chris Becker: Reserve Bank of Australia
Anny Francis: Reserve Bank of Australia
Calebe de Roure: Reserve Bank of Australia
Brendan Wilson: Reserve Bank of Australia

RBA Research Discussion Papers from Reserve Bank of Australia

Abstract: In Australia repurchase (repo) obligations are traded bilaterally 'over-the-counter' between parties, rather than on an exchange. As a result, it is difficult to obtain quotes of executable prices, trading volumes, and related data that are representative of the market. Market conditions are therefore not easy to assess and often dependent on anecdotal evidence. Over the years, the Reserve Bank of Australia has published data and analysis of the repo market by providing indirect perspectives using data from its own open market operations that are conducted using repos. This paper contributes to this work. The Reserve Bank conducts open market operations to manage liquidity in the interbank market, provide settlement balances for the smooth functioning of the payments system, and for the implementation of monetary policy. Repos are an integral part of these operations. The eligible private sector counterparties in these auctions have a variety of reasons for participating. We arrange their bids in an ascending order in a number of distinct phases so that they can be used to make inferences about the demand for repo and hence market operations. Several insights allow us to better understand the dynamics underpinning the repo market. The findings mainly relate to the period prior to the implementation of unconventional monetary policies in March 2020.

Keywords: monetary policy; repurchase agreement; liquidity management; open market operations; money market (search for similar items in EconPapers)
JEL-codes: E41 E42 E43 E52 E58 (search for similar items in EconPapers)
Date: 2024-05
New Economics Papers: this item is included in nep-ban, nep-cba and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:rba:rbardp:rdp2024-03

DOI: 10.47688/rdp2024-03

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