Are Repo Markets Fragile? Evidence from September 2019

Sriya Anbil, Alyssa G. Anderson and Zeynep Senyuz
Additional contact information
Sriya Anbil: https://www.federalreserve.gov/econres/sriya-l-anbil.htm
Alyssa G. Anderson: https://www.federalreserve.gov/econres/alyssa-g-anderson.htm

No 2021-028, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We show that the segmented structure of the U.S. Treasury repo market, in which some participants have limited access across the segments, leads to rate dispersion, even in this essentially riskless market. Using confidential data on repo trading, we demonstrate how the rate dispersion between the centrally cleared and over-the-counter (OTC) segments of the Treasury repo market was exacerbated during the stress episode of September 2019. Our results highlight that, while segmentation can increase fragility in the repo market, the presence of strong trading relationships in the OTC segment helps mitigate it by reducing rate dispersion.

Keywords: Repo market; OTC market; CCP; Segmentation; Financial stability (search for similar items in EconPapers)
JEL-codes: E43 E52 G10 G23 (search for similar items in EconPapers)
Pages: 58 p.
Date: 2021-04-30
New Economics Papers: this item is included in nep-fmk, nep-mac and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2021-28

DOI: 10.17016/FEDS.2021.028

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