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Bidder Behavior in Repo Auctions without Minimum Bid Rate: Evidence from the Bundesbank

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Author Info
Nautz, Dieter
Linzert, Tobias
Breitung, Jörg

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Abstract

A distinguishing feature of the ECB?s monetary policy setup is the preannouncement of a minimum bid rate in its weekly repo auctions. However, whenever interest rates are expected to decline, the minimum bid rate is viewed as too high and banks refrain from bidding, severely impeding the ECB?s money market management. To shed more light on banks? underbidding, we perform a panel analysis of the bidder behavior in the repo auctions of the Bundesbank where no minimum bid rate was set. Our results indicate that neither bank?s participation nor the submitted bid amount is significantly affected by an expected rate cut. This suggests that abandoning the minimum bid rate might increase the efficiency of the ECB?s money market management. -- Nach dem Vorbild der Deutschen Bundesbank spielen wöchentliche Repo-Auktionen (die Hauptrefinanzierungsgeschäfte) eine zentrale Rolle für die Geldpolitik der Europäischen Zentralbank. Das dort bereitgestellte Refinanzierungsvolumen bestimmt die Liquidität des Bankensektors und der dabei von der EZB gesetzte Mindestbietungssatz gilt als geldpolitischer Leitzins für die Zinssätze am Interbankengeldmarkt. Ausgangspunkt dieser Arbeit ist die Beobachtung, dass die Verwendung eines Mindestbietungssatzes bei Zinssenkungserwartungen zu einem unerwünschten Unterbieten der Banken führt. Im Extremfall eines Bieterstreiks wird das Liquiditätsmanagement der EZB merklich behindert. Thema dieser Studie ist das Bieteverhalten der Banken bei den Repo-Auktionen der Bundesbank, die in den 90er Jahren bei den Zinstendern auf die Vorgabe eines Mindestbietungssatzes verzichtete. Auf der Grundlage individueller Bietedaten wird mit Hilfe panelökonometrischer Methoden untersucht, wie verschiedene Faktoren, wie zum Beispiel Zinserwartungen, Opportunitätskosten, Zinsunsicherheit oder der Bankentyp die Teilnahmeentscheidung und das Bietevolumen einer Bank bei einem Zinstender ohne Mindestbietungssatz bestimmen. Die empirischen Ergebnisse zeigen, dass Zinserwartungen, auch bei den Bundesbank Auktionen das Bieteverhalten der Banken beeinflussten. Allerdings verursachen Zinserwartungen im Gegensatz zur EZB keine abrupten Änderungen im Bieteverhalten und auch keine Bieterstreiks. Offenbar bewirkte das Fehlen eines Mindestbietungssatzes, dass sich die Gebote der Banken und damit der Reposatz und die Zinssätze am Interbankengeldmarkt graduell an ein verändertes Zinsniveau anpassen konnten.

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Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2003,13.

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Date of creation: 2003
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Handle: RePEc:zbw:bubdp1:4210

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Related research
Keywords: Monetary Policy Instruments; Auctions; Bidder Behavior; Panel Analysis;

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Find related papers by JEL classification:
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Nyborg, Kjell G. & Strebulaev, Ilya A., 2001. "Collateral and short squeezing of liquidity in fixed rate tenders," Journal of International Money and Finance, Elsevier, vol. 20(6), pages 769-792, November. [Downloadable!] (restricted)
  2. 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. [Downloadable!] (restricted)
  3. Dieter Nautz & Jörg Oechssler, 2003. "The Repo Auctions of the European Central Bank and the Vanishing Quota Puzzle," Scandinavian Journal of Economics, Blackwell Publishing, vol. 105(2), pages 207-220, 06. [Downloadable!] (restricted)
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  4. Hoidal Bjonnes, Geir, 2001. "Winner's Curse in Discriminatory Price Auctions: Evidence from the Norwegian Treasury Bill Auctions," SIFR Research Report Series 3, Institute for Financial Research. [Downloadable!]
  5. Nautz, Dieter, 1997. "How Auctions Reveal Information: A Case Study on German REPO Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 17-25, February.
  6. Nautz, Dieter, 1998. "Banks' demand for reserves when future monetary policy is uncertain," Journal of Monetary Economics, Elsevier, vol. 42(1), pages 161-183, June. [Downloadable!] (restricted)
  7. Kjell G. Nyborg & Kristian Rydqvist & Suresh M. Sundaresan, 2002. "Bidder Behavior in Multiunit Auctions: Evidence from Swedish Treasury Auctions," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 394-424, April. [Downloadable!] (restricted)
  8. Juan Ayuso & Rafael Repullo, 2001. "Why Did the Banks Overbid? An Empirical Model of the Fixed Rate Tenders of the European Central Bank," Banco de España Working Papers 0105, Banco de España. [Downloadable!]
  9. Ayuso, Juan & Repullo, Rafael, 2001. "Why did the banks overbid? An empirical model of the fixed rate tenders of the European Central Bank," Journal of International Money and Finance, Elsevier, vol. 20(6), pages 857-870, November. [Downloadable!] (restricted)
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  10. Guthrie, Graeme & Wright, Julian, 2000. "Open mouth operations," Journal of Monetary Economics, Elsevier, vol. 46(2), pages 489-516, October. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ben Craig & Falko Fecht, 2006. "The Eurosystem money market auctions: a banking perspective," Working Paper 0506, Federal Reserve Bank of Cleveland. [Downloadable!]
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