Interest rate setting on the Swiss Franc repo market

Abstract

Summary Repurchase agreements (repos) are secured money market transactions. The cash taker provides collateral in the form of securities and in return receives money from the cash provider. To ensure the continuous covering of the cash amount, the definition of eligible collateral, its handling and valuation play an important role. This is mainly because the collateral nearly eliminates credit risk. In Switzerland, Swiss franc repos are almost exclusively conducted via the highly standardized repo platform, with four different pre-defined collateral baskets. Each basket comprises different security categories, such as government bonds or covered bonds. This paper analyzes the interest rate setting on the repo market with data from June 1999 to June 2005. It evaluates if the securities provided as collateral influenced the repo rate or not. A price differentiation with respect to the collateral provided is found.

Networks and lending conditions: empirical evidence from the Swiss franc money markets

“…Due to the low number of observations for longer maturities, only overnight transactions are considered. Transactions concluded on the last working day of a minimum reserve requirement period and on the last working day of a month are excluded due to the high volatility in interest rates on such days, as proposed by Kraenzlin (2009) and Mancini et al (2016). Table 1 in the appendix provides summary statistics for the dependent variables for different time periods.…”

(In)efficiencies of current financial market infrastructures: an empirical assessment

“…This paper presents the first empirical findings on the settlement performance of the Swiss franc money market. Other empirical work on the Swiss franc money market done so far focused on intraday liquidity patterns [see Fuhrer (2017)], bargaining power [see Kraenzlin and Scarpatetti (2011)], interest rate setting behaviour [see Kraenzlin (2009) and Kraenzlin and Nellen (2010)], or the re-use of collateral (Fuhrer et al 2015). Overall, empirical work on settlement delays is very limited.…”

Visibility graph combined with information theory: an estimator of stock market efficiency

“…Afterwards, SNB began a major increase in liquidity provision, and activity in both markets nearly came to a halt. Transactions concluded on the last working day of a minimum reserve requirement period and on the last working day of a month are excluded due to the high volatility in interest rates on such days, as proposed by Kraenzlin (2009) and Mancini et al (2016). Table 1 in the online appendix provides summary statistics for the dependent variables for different time periods.…”