The Interday and Intraday Patterns of the Overnight Market: Evidence from an Electronic Platform

Abstract

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Implicit Intraday Interest Rate in the UK Unsecured Overnight Money Market

“…We also include a variable that captures the distance of actual average reserves from the target. The hypothesis is that a borrower facing an increased pressure to meet their reserves target may be willing to accept less favourable terms than a borrower facing no such concerns, as shown in Beaupain andDurré (2008) andFecht, Nyborg, andRocholl (2011). Finally, we include a measure of aggregate reserves available in the settlement system to control for the effects of changing supply of reserves.…”

Nonlinear Liquidity Adjustments in the Euro Area Overnight Money Market

“…As reported in Durré and Nardelli (2008) or Beaupain and Durré (2008), these structural changes have significantly altered the dynamics of the overnight segment. In particular, these changes have led to a situation in which expectations of key ECB interest rates are flat over the entire maintenance period, and there are thus no more incentives for underbidding.…”

“…In particular, these changes have led to a situation in which expectations of key ECB interest rates are flat over the entire maintenance period, and there are thus no more incentives for underbidding. For a detailed description of the operational framework and its link to the segments of the money market, see ECB (2003), ECB (2008), or Beaupain and Durré (2008).…”

“…Our rationale for using a parsimonious 2-regime specification comes from empirical evidence of 2 stages in the dynamics of the overnight segment of the money market over the reserve maintenance period (see, e.g., Beaupain and Durré (2008)). The behaviour of banks in this market indeed appears significantly different over the last days (i.e., the days between the last main refinancing operation allotment of a reserve maintenance period and the end of that period) compared to the other days of the reserve maintenance period, which essentially reflects an increased pressure for finding liquidity as reserve requirements eventually become more binding.…”

Structure in the Italian overnight loan market

“…First of all, unlike stocks, loans are not a perfectly homogeneous good; if a lender wants to make a loan contract depends on the credit quality of the borrower and possibly on his already existing exposure to this borrower. Secondly, the market is not anonymous, the counterparts of a trade know each other, and might negotiate about a trade before settling it on the E-mid platform (see also Beaupain and Durré, 2008). This is likely to lead to a sluggish reaction to price movements.…”