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Expected repo specialness costs and the Treasury auction cycle

Author

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  • Frank M. Keane

Abstract

Repo rates for the most recently issued or \\"on-the-run\\" securities often diverge from general repo rates. The purpose of this study is to convey that relatively sizable divergences in repo rates for on-the-run issues are normal repeating events for the Treasury market, rather than evidence of abnormal circumstances. The costs associated with these repo market premia are small for short holding periods and are sometimes offset by gains from declining cash market premia for longer holding periods. Moreover, repo specialness costs seem small when considered against the alternative of not using the repo market.

Suggested Citation

  • Frank M. Keane, 1995. "Expected repo specialness costs and the Treasury auction cycle," Research Paper 9504, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednrp:9504
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    Cited by:

    1. Stefania D'Amico & Roger Fan & Yuriy Kitsul, 2013. "The Scarcity Value of Treasury Collateral: Repo Market Effects of Security-Specific Supply and Demand Factors," Working Paper Series WP-2013-22, Federal Reserve Bank of Chicago.
    2. Stefania D’Amico & N Aaron Pancost, 2022. "Special Repo Rates and the Cross-Section of Bond Prices: The Role of the Special Collateral Risk Premium [Pr icing the term structure with linear regressions]," Review of Finance, European Finance Association, vol. 26(1), pages 117-162.

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