How does the repo market behave under stress? Evidence from the Covid-19 crisis
Anne-Caroline Hüser (),
Caterina Lepore () and
Luitgard Veraart ()
Additional contact information
Anne-Caroline Hüser: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH
Caterina Lepore: International Monetary Fund
Luitgard Veraart: London School of Economics and Political Science
No 910, Bank of England working papers from Bank of England
We examine how the repo market operates during liquidity stress by applying network analysis to novel transaction-level data of the overnight gilt repo market including the Covid-19 crisis. During this crisis, the repo network becomes more connected, with most institutions relying on existing trade relationships to transact. There are however significant changes in the repo volumes and spreads during the stress relative to normal times. We find a significant increase in volumes traded in the cleared segment of the market. This reflects a preference for dealers and banks to transact in the cleared rather than the bilateral segment. Funding decreases towards non-banks, only increasing for hedge funds. Further, spreads are higher when dealers and banks lend to rather than borrow from non-banks.
Keywords: Repo market; liquidity risk; financial networks; market microstructure; Covid-19 crisis (search for similar items in EconPapers)
JEL-codes: D85 G01 G21 G23 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2021-02-26, Revised 2021-06-18
New Economics Papers: this item is included in nep-cwa, nep-eec, nep-fmk and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://www.bankofengland.co.uk/-/media/boe/files/ ... -covid-19-crisis.pdf Full text (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0910
Access Statistics for this paper
More papers in Bank of England working papers from Bank of England Bank of England, Threadneedle Street, London, EC2R 8AH. Contact information at EDIRC.
Bibliographic data for series maintained by Digital Media Team ().