Eurosystem’s asset purchases and money market rates

W. Arrata, Benoît Nguyen, I. Rahmouni-Rousseau and Miklos Vari

Working papers from Banque de France

Abstract: Some Euro area money market rates have been standing below the deposit facility rate since 2015, which coincided with the start of the Eurosystem’s public sector purchase program (PSPP). In this paper, we explore empirically the interactions between the PSPP and short term secured money market rates (repo rates). We document different channels through which asset purchases may affect the various segments of the Euro area repo market. Using proprietary data from the PSPP purchases and transactions made on the repo market for specific securities (“special”), our results show that the PSPP has contributed to push down repo rate, in particular prior to January 2017. On average, purchasing 1% of a bond outstanding is associated with a decline in its repo rate of -0.78 bps.

Keywords: specialness; repo market; asset purchases; money market. (search for similar items in EconPapers)
JEL-codes: E52 E58 G10 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2017
New Economics Papers: this item is included in nep-eec, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:652

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