Daytime is money
AbstractBased on real-time trade data from the Swiss franc overnight interbank repo market and SIX Interbank Clearing (SIC) - the Swiss real-time gross settlement (RTGS) system - we are able to gain valuable insights on the daytime value of money and its determinants: First, an implicit hourly interbank interest rate can be derived from the intraday term structure of the overnight rate. We thereby provide evidence that an implicit intraday money market exists. Second, we show that after the introduction of the foreign exchange settlement system CLS the value of intraday liquidity has increased during the hours of the CLS settlement cycle. Third, the turnover as well as the liquidity in SIC influence the intraday rate correspondingly. These facts provide evidence for the cost of immediacy. Features like RTGS, delivery-versus-payment and payment-versus-payment substitute credit risk with liquidity risk which in turn increases the value of intraday liquidity. The analysis is central bank policy relevant insofar as different designs of intraday liquidity facilities and different collateral policies result in different intraday term structures for the overnight money market.
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Bibliographic InfoPaper provided by Swiss National Bank in its series Working Papers with number 2010-06.
Length: 31 pages
Date of creation: 2010
Date of revision:
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interbank money market; intraday credit; term structure;
Other versions of this item:
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-04-09 (All new papers)
- NEP-CBA-2011-04-09 (Central Banking)
- NEP-MAC-2011-04-09 (Macroeconomics)
- NEP-MON-2011-04-09 (Monetary Economics)
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- Robert Oleschak & Thomas Nellen, 2013. "Does SIC need a heart pacemaker?," Working Papers 2013-10, Swiss National Bank.
- Marius Jurgilas & Filip Zikes, 2013.
"Implicit intraday interest rate in the UK unsecured overnight money market,"
2013/09, Norges Bank.
- Jurgilas, Marius & Zikes, Filip, 2012. "Implicit intraday interest rate in the UK unsecured overnight money market," Bank of England working papers 447, Bank of England.
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