Repo Rates and the Collateral Spread: Evidence

49 Pages Posted: 13 Mar 2019

See all articles by Kjell G. Nyborg

Kjell G. Nyborg

University of Zurich - Department of Banking and Finance; Centre for Economic Policy Research (CEPR); Swiss Finance Institute

Cornelia Roesler

Accenture AG

Multiple version iconThere are 2 versions of this paper

Date Written: February 2019


The spread between unsecured and repo rates (collateral spread) fluctuates substantially and is negative on a significant portion of days. Recent theoretical work argues that collateral spreads are determined by a constrained-arbitrage relation between the unsecured rate, the repo rates, and the expected rate of return of the underlying security. Negative collateral spreads arise in equilibrium if unsecured markets are sufficiently tight, unsecured rates spike down, or security markets are sufficiently depressed in terms of prices, liquidity, and volatility. The objective of this paper is to examine the determinants of collateral spreads by testing the constrained-arbitrage theory. The findings are supportive.

Keywords: collateral spread, Eurex Repo, general collateral, liquidity, repo rate, unsecured rate

JEL Classification: G01, G12, G21

Suggested Citation

Nyborg, Kjell G. and Roesler, Cornelia, Repo Rates and the Collateral Spread: Evidence (February 2019). CEPR Discussion Paper No. DP13547, Available at SSRN:

Kjell G. Nyborg (Contact Author)

University of Zurich - Department of Banking and Finance ( email )

Plattenstrasse 14
Zürich, 8032
+41 (0)44 634 2980 (Phone)

Centre for Economic Policy Research (CEPR)

United Kingdom

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4

Cornelia Roesler

Accenture AG ( email )

Fraumuensterstr. 16
Zurich, Zurich 8001

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