Overbidding in Fixed Rate Tenders - An Empirical Assessment of Alternative Explanations
AbstractThis paper investigates various theories explaining banks' overbidding in the fixed rate tenders of the European Central Bank (ECB). Using auction data from both the Bundesbank and the ECB, we show that none of the theories can on its own explain the observed overbidding. This implies that the proposed new rules by the ECB, aimed at neutralizing interest rate expectations, would not eliminate overbidding if the rationing rule in the fixed rate tenders remains unchanged.
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Bibliographic InfoPaper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number bgse10_2003.
Date of creation: Jun 2003
Date of revision:
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Overbidding; repo auctions; monetary policy instruments of the European Central Bank;
Other versions of this item:
- Nautz, Dieter & Oechssler, Jorg, 2006. "Overbidding in fixed rate tenders--an empirical assessment of alternative explanations," European Economic Review, Elsevier, vol. 50(3), pages 631-646, April.
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
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- Sébastien Kraenzlin & Martin Schlegel, 2009.
"Bidding Behavior in the SNB's Repo Auctions,"
2009-14, Swiss National Bank.
- Dieter Nautz & Christian J. Offermanns, 2007.
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John Wiley & Sons, Ltd., vol. 12(3), pages 287-300.
- Offermanns, Christian J. & Nautz, Dieter, 2006. "The dynamic relationship between the Euro overnight rate, the ECB´s policy rate and the term spread," Discussion Paper Series 1: Economic Studies 2006,01, Deutsche Bundesbank, Research Centre.
- 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.
- Ewerhart, Christian & Cassola, Nuno & Valla, Natacha, 2005. "Equilibrium and inefficiency in fixed rate tenders," Working Paper Series 0554, European Central Bank.
- Ewerhart, Christian & Cassola, Nuno & Valla, Natacha, 2012. "Overbidding in fixed rate tenders: The role of exposure risk," Journal of Banking & Finance, Elsevier, vol. 36(2), pages 539-549.
- Nautz, Dieter & Offermanns, Christian J., 2008. "Volatility transmission in the European money market," The North American Journal of Economics and Finance, Elsevier, vol. 19(1), pages 23-39, March.
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