The Intraday Interest Rate: What's that?

45 Pages Posted: 21 Jun 2016

See all articles by Puriya Abbassi

Puriya Abbassi

Deutsche Bundesbank

Falko Fecht

Frankfurt School of Finance & Management

Johannes Tischer

Johannes Gutenberg University Mainz

Date Written: 2015

Abstract

We study the intraday interest rate in a CCP-based GC pooling repo market and its key determinants. Since collateral used in this market is identical to collateral eligible for the daylight overdraft facility of the Eurosystem, any intraday rate in this market cannot be a result of collateral constraints keeping banks from using the overdraft for arbitrage. Nevertheless, we find that in the crisis period a statistically and economically significant intraday spread (up to 60 basis points) prevailed that was only somewhat mitigated by the ECB's unconventional monetary policy measures. Our results show that this spread was mainly determined by the market liquidity of the repo market, suggesting that the intraday spread is largely a liquidity premium.

Keywords: intraday interest rate, central counterparty, overnight repos, central bank intervention, financial crisis

JEL Classification: E43, E50, G01, G10, G21

Suggested Citation

Abbassi, Puriya and Fecht, Falko and Tischer, Johannes, The Intraday Interest Rate: What's that? (2015). Bundesbank Discussion Paper No. 24/2015, Available at SSRN: https://ssrn.com/abstract=2797048

Puriya Abbassi (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany
00496965993708 (Phone)

Falko Fecht

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

Johannes Tischer

Johannes Gutenberg University Mainz ( email )

Saarstrasse 21
Mainz, D-55099
Germany

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