This paper introduces a methodology to estimate the re-use of collateral based on actual transaction data. With a comprehensive data set from the Swiss franc repo market we are able to provide the first systematic study on the re-use of collateral. We find that re-using collateral was most popular prior to the financial crisis when roughly 10% of the outstanding interbank volume was secured with re-used collateral. Furthermore, we show that the re-use of collateral increases with the scarcity of collateral. By giving an estimate of the collateral re-use and explaining its drivers, the paper contributes to the on-going debate on collateral availability.JEL codes: D47, E58, G01, G18, G21, G32
We study the transmission of changes in the believed location of the lower bound to longterm interest rates since the introduction of negative interest rate policies. The expectations hypothesis of the term structure combined with a lower bound on policy rates suggests that normal policy transmission is reduced when policy rates approach this lower bound. We show that if market participants revise downward the believed location of the lower bound, this may in itself reduce long-term yields. Moreover, normal policy transmission to long-term rates increases. A crosscountry event study suggests that such effects have been empirically relevant during the recent negative interest rate episode.
This paper studies the transmission of changes in short-term interest rates to longer-term government bond yields when interest rates are at very low levels or negative. We focus on Switzerland, where short-term interest rates have been at zero since late 2008 and negative since the beginning of 2015. The expectations hypothesis of the term structure implies that as nominal interest rates approach their lower bound, the effect of short-term rates on longer-term yields should decline, and positive short rate changes should have larger absolute effects than negative short rate changes. Contrary to studies of other countries, we find no evidence for a decline in the effect of short rate changes for the low-interest rate period using Swiss data. However, we do find evidence for the predicted asymmetric effect for positive and negative short rate changes during the period when short-term rates are close to zero. This asymmetry normalized again after the introduction of negative interest rates.
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