Credit and Liquidity in Interbank Rates: A Quadratic Approach

Abstract

Cet article propose un modèle quadratique de la structure par terme des écarts de taux EURIBOR-OIS. Contrairement aux taux OIS, les taux EURIBOR incluent des composantes liées aux risques de crédit et de liquidité. Ces composantes reflètent les compensations demandées par une banque prêteuse pour supporter, respectivement, (a) le risque de défaut de la banque emprunteuse et (b) l'éventualité d'avoir besoin, ultérieurement, des fonds prêtés. Nos résultats apportent un nouvel éclairage sur les politiques non-conventionnelles menées par l'Eurosystème au cours des dernières années. En particulier, ils suggèrent que la majeure partie de la diminution des écarts de taux EURIBOR-OIS observée sur l'année 2012 est liée à des motifs de liquidité.

The Impact of Unconventional Monetary Policy on the Italian Economy During the Sovereign Debt Crisis

“…If anything, the effect of the announcement on the overnight rate and on 10-year yields had the wrong sign. An interpretation is that the market was disappointed by the announcement, because it was expecting an enhancement of the SMP.29 The decrease of the yields on Italian sovereign bonds started in the second half of January 2012, after a series of successful auctions on the primary market for Italian securities.30 Our assessment of the impact of the 3-year LTROs on Euribor-OIS spreads is in line with the results ofDubecq et al (2013) summarized in Section 2.…”

“…The impact of the SMP, the 3-year LTROs and the OMTs on both liquidity and credit risks in the interbank market is analysed by Dubecq et al (2013), who use a quadratic term structure model of the Euribor-OIS spreads. Liquidity risk reflects banks preference for a portfolio of cash and easy-to-liquidate swap contracts over interbank loans, enabling them to cope with potential future liquidity needs; credit risk corresponds to the premium required by the lender to compensate for borrower default risk.…”

Contagion and interdependence in Eurozone bank and sovereign credit markets

“…We follow Filipovic and Trolle (2013), Morana (2013), and Dubecq, Monfort, Renne, and Roussellet (2014), who studied OIS spreads in the monetary market context, to establish our argument on the interbank risk variable. We take the first and second principal components and use them as independent variables in a new postcrisis dynamic correlation regression.…”

The interbank market risk premium, central bank interventions, and measures of market liquidity

“…Observable related proxies of market liquidity are relative asset supplies, traded volumes, or the return di¤erential between assets with the same cash ‡ow but di¤erent liquidity characteristics (such as the yield spread between sovereign and covered bonds used to identify the liquidity premium in the interbank market in Schwartz, 2010, Valenzuela, 2010, and Dubecq et al, 2013.…”