Bidder Behavior in Repo Auctions without Minimum Bid Rate: Evidence from the Bundesbank

Dieter Nautz, Tobias Linzert and Jörg Breitung ()

No 2003,13, Discussion Paper Series 1: Economic Studies from Deutsche Bundesbank

Abstract: A distinguishing feature of the ECB's monetary policy setup is the preannouncement of a minimum bid rate in its weekly repo auctions. However, whenever interest rates are expected to decline, the minimum bid rate is viewed as too high and banks refrain from bidding, severely impeding the ECB's money market management. To shed more light on banks' underbidding, we perform a panel analysis of the bidder behavior in the repo auctions of the Bundesbank where no minimum bid rate was set. Our results indicate that neither bank's participation nor the submitted bid amount is significantly affected by an expected rate cut. This suggests that abandoning the minimum bid rate might increase the efficiency of the ECB's money market management.

Keywords: Monetary Policy Instruments; Auctions; Bidder Behavior; Panel Analysis (search for similar items in EconPapers)
JEL-codes: C23 D44 E52 (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Bidder behaviour in repo auctions without minimum bid rate: evidence from the Bundesbank (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdp1:4210

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