Central banks, debt managers, and specialness in the Bund repo market

Miguel Ampudia, Franziska Schobert, Julian von Landesberger, Pedro Formoso da Silva, Simon Hesse, Alexander Pütz and Alexander Wohlert

No 3259, Working Paper Series from European Central Bank

Abstract: Elevated repo rate specialness for German government bonds in 2016–17, and particularly in 2022-23, has often been linked to the absorption of these securities by the ECB’s asset purchase programmes. We provide the first evidence on how the debt management office mitigates these effects by jointly analyzing daily secondary-market trades and repo operations of the Deutsche Finanzagentur (DFA) alongside Eurosystem transactions in Bunds from 2015–2024. We find two points: first, that Eurosystem purchases depress repo rates about four times more than DFA purchases (0.4 bp vs 0.1 bp per 1% of free float), while DFA repo lending raises repo rates by roughly 0.2 bp per 1% of outstanding volume. Our evidence suggests that DFA interventions helped mitigate scarcity-induced specialness. Second, with elevated hedge fund demand for bonds, the overall alleviating impact was constrained by segmentation in the repo market and by the design of the facilities themselves, which aimed to prevent collateral shortages and fails-to-deliver rather than to provide price support. JEL Classification: E43, E52, E58, G12, G21, H63

Keywords: asset purchases; collateral scarcity; debt management; repo market; repo specialness (search for similar items in EconPapers)
Date: 2026-07
Note: 2445760
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20263259

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