Arbeitspapier
Repo market functioning when the interest rate is low or negative
This paper investigates how a low or negative overnight interest rate might affect the Canadian repo markets. The main conclusion is that the repo market for general collateral will continue to function effectively. However, changes to market conventions - such as the introduction of a charge for settlement fails - or other institutional changes may be required so that the repo market for specific collateral continues to support liquidity on the secondary market for government bonds. The historical experience shows that the special repo market in other jurisdictions can function effectively even if the overnight rate is negative. Closer examination suggests what specific circumstances can lead to persistent settlement fails in the specific collateral repo market. Specifically, the combination of (i) low or negative interest rates, (ii) large aggregate short positions in bonds, and (iii) economic or policy surprises may lead to persistent settlement fails.
- Language
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Englisch
- Bibliographic citation
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Series: Bank of Canada Staff Discussion Paper ; No. 2017-3
- Classification
-
Wirtschaft
General Financial Markets: General (includes Measurement and Data)
Asset Pricing; Trading Volume; Bond Interest Rates
- Subject
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Financial markets
interest rates
market structure and pricing
- Event
-
Geistige Schöpfung
- (who)
-
Fontaine, Jean-Sébastien
Hately, James
Walton, Adrian
- Event
-
Veröffentlichung
- (who)
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Bank of Canada
- (where)
-
Ottawa
- (when)
-
2017
- DOI
-
doi:10.34989/sdp-2017-3
- Handle
- Last update
-
10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Fontaine, Jean-Sébastien
- Hately, James
- Walton, Adrian
- Bank of Canada
Time of origin
- 2017
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