The Introduction of the TMPG Fails Charge for U.S. Treasury Securities

Garbade, Kenneth D.; Keane, Frank M.; Logan, Lorie; Kirby, Amanda Stokes; Wolgemuth, Jennifer

doi:10.2139/ssrn.1692900

Cited by 16 publications

(19 citation statements)

References 5 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…In particular, primary dealers are expected to participate in all issuance auctions of Treasuries, and have traditionally been the predominant purchasers at these auctions. 11 Dealers are also key intermediaries of the Treasury cash market, 8 We keep the details to a minimum, and refer to Fleming (1997), Fleming and Garbade (2004), Garbade, Keane, Logan, Stokes, and Wolgemuth (2010), and Baklanova, Copeland, and McCaughrin (2015) for additional details on Treasury and repo markets, Fleming and Rosenberg (2007) on dealers, and Duffie (2018) and Boyarchenko, Eisenbach, Gupta, Shachar, and Tassel (2018) on post-crisis regulations.…”

Section: The Treasury and Repo Marketsmentioning

confidence: 99%

Treasury Inconvenience Yields during the COVID-19 Crisis

Nagel

Song

2020

View full text Add to dashboard Cite

We appreciate helpful discussions with Wenxin Du and Michael Fleming. We thank Yiran Fan and Tianshu Lyu for great research assistance. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

show abstract

Section: The Treasury and Repo Marketsmentioning

confidence: 99%

Treasury Inconvenience Yields during the COVID-19 Crisis

Nagel

Song

2020

View full text Add to dashboard Cite

show abstract

“…16 Although securities-driven repo often targets specific Treasuries, termed as "special repo" by Duffie (1996), it is also used widely to source general securities when Treasuries are in shortage as a whole. In either case, short-selling incurs costs of searching for securities and failing to deliver, which can lead to large market disruptions (Duffie, Garleanu, and Pedersen (2002), Fleming and Garbade (2004), and Garbade, Keane, Logan, Stokes, and Wolgemuth (2010)). The implementation of the Fed's TSLF program from March 2008 to June 2009 that lent Treasuries to dealers against non-Treasury collateral was designed to alleviate such costs (Fleming, Hrung, and Keane (2009)).…”

Section: The Treasury and Repo Marketsmentioning

confidence: 99%

Treasury Inconvenience Yields During the Covid-19 Crisis

Nagel

Song

2020

SSRN Journal

View full text Add to dashboard Cite

In sharp contrast to most previous crisis episodes, the Treasury market experienced severe stress and illiquidity during the COVID-19 crisis, raising concerns that the safe-haven status of U.S. Treasuries may be eroding. We document large shifts in Treasury ownership and temporary accumulation of Treasury and reverse repo positions on dealer balance sheets during this period. We build a dynamic equilibrium asset pricing model in which dealers subject to regulatory balance sheet constraints intermediate demand/supply shocks from habitat agents and provide repo financing to levered investors. The model predicts that Treasury inconvenience yields, measured as the spread between Treasuries and overnight-index swap rates (OIS), as well as spreads between dealers' reverse repo and repo rates, should be highly positive during the COVID-19 crisis, which are confirmed in the data. The same model framework, adapted to the institutional setting in 2007-2009, also helps explain the negative Treasury-OIS spread observed during the Great Recession.

show abstract

“…We explain "settlement fails" below. As explained in Garbade et al [9], prior to May 2009, US market convention enabled a seller of US Treasury securities to postpone their obligation to deliver the securities without an explicit penalty. As long as short-term interest rates were above 3% or so, the time value of money usually sufficed to encourage timely settlement.…”

Section: Related Literaturementioning

confidence: 99%

Nontraditional Monetary Policy in a Model of Default Risks and Collateral in the Absence of Commitment

Fujiki¹

2017

aeb

View full text Add to dashboard Cite

We show that a central bank could improve the allocation of resources by delivering the defaulting party's collateral goods to those who consume the most quickly. We base our discussion on Mills and Reed [1]'s repo contract model, which shows that the consumption of the lender will be the same whether the borrower is a productive agent or an unproductive agent. We extend their model by considering shocks to the second period of lenders' lives, which force them to consume within an early stage of the second period of their lives. The shock could make the consumption of lenders vary depending on the timing of transactions in the goods market. We show that a central bank could make the consumption of lenders constant regardless of the timing of transactions in the goods market, and could achieve better resource allocation by using various nontraditional monetary policy tools.

show abstract

The Introduction of the TMPG Fails Charge for U.S. Treasury Securities

Cited by 16 publications

References 5 publications

Treasury Inconvenience Yields during the COVID-19 Crisis

Treasury Inconvenience Yields during the COVID-19 Crisis

Treasury Inconvenience Yields During the Covid-19 Crisis

Nontraditional Monetary Policy in a Model of Default Risks and Collateral in the Absence of Commitment

Contact Info

Product

Resources

About