Arbeitspapier

What explains month-end funding pressure in Canada?

The Canadian overnight repo market persistently shows signs of latent funding pressure around month-end periods. Both the overnight repo rate and Bank of Canada liquidity provision tend to rise in these windows. This paper proposes three non-mutually exclusive hypotheses to explain this phenomenon. First, month-end funding pressure may be caused by search frictions. Market participants place a premium on liquidity around month-end periods because of the confluence of a generalized liquidity preference, heightened month-end forecast uncertainty, and resultant search frictions in the repo market. Second, this funding pressure could be attributed to spillovers from the US overnight repo market. Third, month-end funding pressure might be associated with large Canadian banks' end-of-month repo adjustments. By combining market, central-bank and payments data, this paper provides evidence that the first hypothesis explains the latent funding pressure observed on the first day of the month. Using market and non-public regulatory data, this paper further argues that the second and third hypotheses are much less plausible.

Sprache
Englisch

Erschienen in
Series: Bank of Canada Staff Discussion Paper ; No. 2017-9

Klassifikation
Wirtschaft
Demand for Money
Interest Rates: Determination, Term Structure, and Effects
Monetary Policy
Central Banks and Their Policies
Financial Aspects of Economic Integration
International Financial Markets
Information and Market Efficiency; Event Studies; Insider Trading
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Thema
Interest rates
Financial markets
Monetary policy implementation
Monetary policy framework
Transmission of monetary policy

Ereignis
Geistige Schöpfung
(wer)
Sutherland, Christopher S.
Ereignis
Veröffentlichung
(wer)
Bank of Canada
(wo)
Ottawa
(wann)
2017

DOI
doi:10.34989/sdp-2017-9
Handle
Letzte Aktualisierung
20.09.2024, 08:21 MESZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Sutherland, Christopher S.
  • Bank of Canada

Entstanden

  • 2017

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