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Repurchase Agreements with Negative Interest Rates

Michael J. Fleming
Federal Reserve Bank of New York

Kenneth Garbade
Federal Reserve Bank of New York

Current Issues in Economics and Finance, Vol. 10, No. 5, April 2004

Abstract:
Contrary to popular belief, interest rates can drop below zero. From early August to mid-November of 2003, negative rates occurred on certain U.S. Treasury security repurchase agreements. An examination of the market conditions behind this development reveals why market participants are sometimes willing to pay interest on money lent.

Keywords: repurchase agreements, gcf repo, general collateral, fixed income clearing corporation, dealer finance

JEL Classifications: G28, G18, H63

Accepted Paper Series

Date posted: October 04, 2004 ; Last revised: October 22, 2004

Suggested Citation

Fleming, Michael J. and Garbade, Kenneth, Repurchase Agreements with Negative Interest Rates. Current Issues in Economics and Finance, Vol. 10, No. 5, April 2004. Available at SSRN: http://ssrn.com/abstract=599907

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Contact Information

Michael J. Fleming (Contact Author) Federal Reserve Bank of New York ( email ) 33 Liberty Street New York, NY 10045 United States 212-720-6372 (Phone) 212-720-1582 (Fax) HOME PAGE: http://www.newyorkfed.org/research/economists/fleming/
Kenneth Garbade Federal Reserve Bank of New York ( email ) 33 Liberty Street New York, NY 10045 United States