 Determinants of intraday dynamics and collateral selection in centrally cleared and bilateral reposAlfonso Dufour, Miriam Marra and Ivan Sangiorgi Journal of Banking & Finance, 2019, vol. 107, issue C, - Abstract: Using a novel dataset, we study intraday trades of overnight general collateral repurchase agreements (repos) on Italian government bonds. We focus both on repos cleared by central counterparties (CCPs) and traded bilaterally. Intraday bond supply, liquidity and duration significantly affect the spread of repo rates over the European Central Bank (ECB) deposit rate, but after the ECB quantitative easing interventions this impact is much reduced. During the European sovereign debt crisis, the increase in margins further deteriorates repo costs, creating a negative procyclical effect. Once we control for the impact of margin costs, CCP-based repos do not appear to be significantly cheaper than bilateral repos. We also show that bonds with lower liquidity and specialness, greater supply and longer duration are more likely to be selected as collateral. However, during the crisis, CCP-repo borrowers choose collateral bonds with higher liquidity and lower duration to reduce margin and repo trading costs. Keywords: Repurchase agreement; Intraday repo rate; Bond collateral; Funding liquidity; Central counterparty clearing; Counteparty credit risk (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:107:y:2019:i:c:10 DOI: 10.1016/j.jbankfin.2019.105610 Access Statistics for this article Journal of Banking & Finance is currently edited by Ike Mathur More articles in Journal of Banking & Finance from Elsevier |
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