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Bidding behavior in the SNB’s repo auctions

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  • Kraenzlin, Sébastien
  • Schlegel, Martin

Abstract

The Swiss National Bank (SNB) provides reserves to market participants via fixed rate tender auctions. We analyze the banks’ bidding behavior and identify the determinants for the decision to participate as well as on the amount to tender. We find that a bank’s bids from the previous day, the amount of maturing repo operations with the SNB as well as the maturing volume on the interbank repo market have for most banks a significant effect. The autonomous factors (government balances at the SNB and currency in circulation) are of only minor importance. A further determinant is the attractiveness of the SNB’s auction rate compared to the prevailing interbank market repo rate. Further, the question is addressed whether the bidding behavior changed in the financial market crisis of 2007/2008. There is little evidence of a systematic change in bidding behavior in the crisis. This results from the fact that the SNB has addressed the volatile demand for reserves in the crisis with overnight fine-tuning operations.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 31 (2012)
Issue (Month): 2 ()
Pages: 170-188

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Handle: RePEc:eee:jimfin:v:31:y:2012:i:2:p:170-188

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Web page: http://www.elsevier.com/locate/inca/30443

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Keywords: Open market operations; Bidding behavior; Fixed rate tender auction; Repo; Switzerland;

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  1. Ehrhart, Karl-Martin, 2000. "A Well-known Rationing Game," Sonderforschungsbereich 504 Publications 01-36, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
  2. Linzert, Tobias & Nautz, Dieter & Breitung, Jorg, 2006. "Bidder behavior in central bank repo auctions: Evidence from the Bundesbank," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 16(3), pages 215-230, July.
  3. Basil Guggenheim & Sébastien Philippe Kraenzlin & Silvio Schumacher, 2011. "Exploring an uncharted market: Evidence on the unsecured Swiss franc money market," Working Papers 2011-05, Swiss National Bank.
  4. Sébastien Philippe Kraenzlin & Benedikt von Scarpatetti, 2011. "Bargaining Power in the Repo Market," Working Papers 2011-14, Swiss National Bank.
  5. Thomas J. Jordan & Peter Kugler, 2004. "Implementing Swiss Monetary Policy: Steering the 3M-Libor with Repo Transactions," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 140(III), pages 381-393, September.
  6. Ehrhart, Karl-Martin, 2001. "European Central Bank operations: experimental investigation of the fixed rate tender," Journal of International Money and Finance, Elsevier, vol. 20(6), pages 871-893, November.
  7. Dieter Nautz & Jörg Oechssler, 2003. "Overbidding in Fixed Rate Tenders - An Empirical Assessment of Alternative Explanations," Bonn Econ Discussion Papers bgse10_2003, University of Bonn, Germany.
  8. Eisenschmidt, Jens & Hirsch, Astrid & Linzert, Tobias, 2009. "Bidding behaviour in the ECB’s main refinancing operations during the financial crisis," Working Paper Series 1052, European Central Bank.
  9. Breitung, Jorg & Nautz, Dieter, 2001. "The empirical performance of the ECB's repo auctions: evidence from aggregated and individual bidding data," Journal of International Money and Finance, Elsevier, vol. 20(6), pages 839-856, November.
  10. Sébastien Kraenzlin, 2007. "The characteristics and development of the Swiss franc repurchase agreement market," Financial Markets and Portfolio Management, Springer, vol. 21(2), pages 241-261, June.
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