Overnight Interbank Loan Markets

Publisher Website
Google Scholar
Abstract
This paper investigates transactions and interest rates on brokered and direct trades in federal funds, Euro-dollar transactions, and repurchase agreements, all of which are used by banks in overnight funding. We expand on earlier work on calendar-day effects in these markets, investigating also volumes of funding in recent years. Our data include daily trades in federal funds reported by major brokers and also records of uncollateralized transactions over the wire transfer system operated by the Federal Reserve. We find that the share of the overnight interbank loan market represented by brokered fed funds has decreased and is now only about one-third of the total. We also show evidence of close but incomplete arbitrage among the major segments of the overnight interbank market, though the specific calendar-day patterns of spreads and volatilities have evolved relative to the literature using earlier sample periods.

This publication has 10 references indexed in Scilit: