Questions tagged [money-markets]

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4
votes
0answers
73 views

Why did the month-end (ir)regularities in Effective Federal Funds Rate (EFFR) disappear in 2018?

The Federal Funds rate has exhibited regular drops at month ends since beginning of 2015. (Source: FRED https://fred.stlouisfed.org/series/EFFR) Some studies (e.g., https://www.mdpi.com/1911-8074/14/...
0
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0answers
52 views

Liquidity difference between reserves and Treasuries

Treasury bills tend to offer higher yields than central bank reserves (and other forms of "cash"). Is this primarily due to risk (default + duration risk due to small difference in maturity)?...
7
votes
1answer
360 views

Why are T-bills yielding lower than the reverse repo rate?

With another US debt ceiling debacle looming, I just realized something that runs against my intuition: Many of the Treasury bills maturing in 6 months (with the exception of the ones maturing near ...
1
vote
0answers
73 views

Bootstrapping EURIBOR curve

I’m trying to bootstrap a 1m, 3m and 6m euribor curve. The data I’m using is 3m Euribor swaps, 1m/3m basis spreads and 3m/6m basis spreads. I’ve successfully used quantlib to bootstrap a 3m curve but ...
3
votes
2answers
271 views

Why are MMFs willing to lend at 0% through reverse repo?

The reverse repo (RRP) rate is at/near zero lately, but RRP usage is still quite high. Why are people (money market funds?) willing to lend at 0% in the repo market? Is it because of regulatory ...
2
votes
1answer
117 views

What are the practical costs of repo for a bond trading desk?

I appreciate what a repo/reverse repo transaction is, but I'm struggling to understand exactly how the cost of funding trades via repo works from a practical point of view for a bond trader. Current ...
1
vote
1answer
158 views

Japan benchmark rates

Can you please confirm on the following? The difference between TONA (also called TONAR), JPY Libor, TIBOR is that: JPY Libor, TIBOR are based on quotes from panel banks. The difference between them ...
1
vote
1answer
126 views

China carry trade, borrow in the repo market and invest in govies

"Excess funds in the banking system had juiced leverage in financial markets by driving China’s overnight repo rate to a record low of 0.59% in December. The cheap short-term financing enabled ...
3
votes
2answers
412 views

What drives the difference between M1 & M2 money supply (in the US)?

From what I understand the only entity that controls M1 in US is the Federal Reserve. Is it true that M2-M1( M2 minus M1; the part of M2 that is NOT in M1 like timed deposits) is controlled by the ...
1
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1answer
89 views

ECB - Two Tier System

It's said the theoretical aim of the ECB Two-tier system (exempt a portion of the excess reserves from negative rates) was designed to: offset the direct costs of negative interest rates on banks, ...
0
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0answers
56 views

Construct the midsection of the yield curve from Eurodollar futures prices

As detailed in this section of the Wikipedia page on the Yield Curve, we can construct the yield curve from the money market as follows: The LIBOR rates give us the short end of the curve (t < 3m) ...
2
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1answer
109 views

Funding foreign asset purchase with repo

https://www.bis.org/publ/qtrpdf/r_qt1709e.pdf extract from page 38 An investor wants to buy a foreign currency security with domestic cash but does not wish to run FX risk. Then, three transactions ...
5
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4answers
259 views

Practical purpose of overnight repos

I know this might not be a very quantitative question, but I figure this is the most relevant place to ask this. Over that last few days, there has been a lot of news from the repo market, for ...
2
votes
1answer
422 views

repo rate v.s. reverse repo rate

From a book, I read that the repo rate is usually higher than the reverse repo rate. i.e., the rate of financing a long security position is higher than the rate to lend cash using securities as ...
17
votes
0answers
421 views

Could banks move to continuous (rather than overnight) funding?

For a long time, the dominant tenors for money market and FX instruments were 6 months and 3 months, and banks slowly moved to commercial trades at those tenors but funding overnight. If this is a ...