How Has Monetary and Regulatory Policy Affected Trading Relationships in the U.S. Repo Market?

Sriya Anbil and Zeynep Senyuz
Additional contact information
Sriya Anbil: Federal Reserve Board
Zeynep Senyuz: Federal Reserve Board

International Journal of Central Banking, 2022, vol. 18, issue 4, 1-52

Abstract: We analyze the effects of changes in monetary and regulatory policy on trading dynamics in the U.S. triparty repo market. Using a confidential data set of transactions, we find that the Fed's reverse repo (RRP) facility led to a 16 percent reduction in cash lending by money market mutual funds (MMFs) eligible to transact with the Fed. We show that the RRP facility increased the bargaining power of MMFs on days when their borrowers, non-U.S. dealers, increased their window-dressing activity due to Basel III capital reforms. For those dealers reliant on eligible MMF funding, window dressing became more expensive, but the average rates they paid on other days remained stable because of anchoring by the facility. We also show that the RRP facility influenced the way MMFs managed their balance sheets, and directed them towards safer investments.

JEL-codes: C32 E43 E52 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.ijcb.org/journal/ijcb22q4a1.pdf (application/pdf)
http://www.ijcb.org/journal/ijcb22q4a1.htm (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ijc:ijcjou:y:2022:q:4:a:1

Access Statistics for this article

International Journal of Central Banking is currently edited by Loretta J. Mester

More articles in International Journal of Central Banking from International Journal of Central Banking
Bibliographic data for series maintained by Bank for International Settlements ().