Are Repo Markets Fragile? Evidence from September 2019

58 Pages Posted: 14 Jun 2021 Last revised: 30 Jun 2021

See all articles by Sriya Anbil

Sriya Anbil

Board of Governors of the Federal Reserve System

Alyssa G. Anderson

Board of Governors of the Federal Reserve System

Zeynep Senyuz

Board of Governors of the Federal Reserve System

Date Written: April, 2021

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.

JEL Classification: E52, G10, E43, G23

Suggested Citation

Anbil, Sriya and Anderson, Alyssa G. and Senyuz, Zeynep, Are Repo Markets Fragile? Evidence from September 2019 (April, 2021). FEDS Working Paper No. 2021-28, Available at SSRN: https://ssrn.com/abstract=3865417 or http://dx.doi.org/10.17016/FEDS.2021.028

Sriya Anbil (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Alyssa G. Anderson

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Zeynep Senyuz

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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