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What financing data reveal about dealer leverage

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Abstract

The Federal Reserve collects data on the financing activities of the primary government securities dealers. Some market analysts argue that the data show a considerable rise in dealer leverage in recent years. However, a close reading of the data suggests that dealer borrowing involving fixed-income securities has grown only modestly. Moreover, the increase that has occurred is not clearly associated with greater risk taking.

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  • Tobias Adrian & Michael J. Fleming, 2005. "What financing data reveal about dealer leverage," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 11(Mar).
    • Handle: RePEc:fip:fednci:y:2005:i:mar:n:v.11no.3
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    1. Arturo Estrella & Frederic S. Mishkin, 1996. "The yield curve as a predictor of U.S. recessions," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 2(Jun).
    2. Adrian, Tobias, 2009. "Inference, arbitrage, and asset price volatility," Journal of Financial Intermediation, Elsevier, vol. 18(1), pages 49-64, January.
    3. Grossman, Sanford J. & Vila, Jean-Luc, 1992. "Optimal Dynamic Trading with Leverage Constraints," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 27(2), pages 151-168, June.
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    Cited by:

    1. Javier Bianchi & Saki Bigio & Charles Engel, 2021. "Scrambling for Dollars: International Liquidity, Banks and Exchange Rates," NBER Working Papers 29457, National Bureau of Economic Research, Inc.
    2. Michael J. Fleming & Giang Nguyen & Joshua V. Rosenberg, 2007. "How do treasury dealers manage their positions?," Staff Reports 299, Federal Reserve Bank of New York.
    3. Teo, Melvyn, 2011. "The liquidity risk of liquid hedge funds," Journal of Financial Economics, Elsevier, vol. 100(1), pages 24-44, April.
    4. Tobias Adrian & Brian Begalle & Adam Copeland & Antoine Martin, 2013. "Repo and Securities Lending," NBER Chapters, in: Risk Topography: Systemic Risk and Macro Modeling, pages 131-148, National Bureau of Economic Research, Inc.
    5. Tobias Adrian & Hyun Song Shin, 2008. "Financial intermediaries, financial stability and monetary policy," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 287-334.
    6. Adrian, Tobias & Shin, Hyun Song, 2010. "Liquidity and leverage," Journal of Financial Intermediation, Elsevier, vol. 19(3), pages 418-437, July.
    7. Daniel Covitz & Nellie Liang & Tobias Adrian, 2015. "Financial Stability Monitoring," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 357-395, December.
    8. Abhishek Kumar & Sushanta Mallick & Madhusudan Mohanty & Fabrizio Zampolli, 2023. "Market Volatility, Monetary Policy and the Term Premium," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 85(1), pages 208-237, February.
    9. Tobias Adrian & Adam B. Ashcraft, 2012. "shadow banking: a review of the literature," The New Palgrave Dictionary of Economics,, Palgrave Macmillan.
    10. Boyson, Nicole M. & Stahel, Christof W. & Stulz, Rene, 2008. "Hedge Fund Contagion and Liquidity," Working Paper Series 2008-8, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    11. Tobias Adrian & Adam B. Ashcraft, 2012. "Shadow Banking Regulation," Annual Review of Financial Economics, Annual Reviews, vol. 4(1), pages 99-140, October.
    12. Nicole M. Boyson & Christof W. Stahel & René M. Stulz, 2010. "Hedge Fund Contagion and Liquidity Shocks," Journal of Finance, American Finance Association, vol. 65(5), pages 1789-1816, October.
    13. Fricke, Christoph & Menkhoff, Lukas, 2015. "Financial conditions, macroeconomic factors and disaggregated bond excess returns," Journal of Banking & Finance, Elsevier, vol. 58(C), pages 80-94.
    14. Boyson, Nicole M. & Stahel, Christof W. & Stulz, Rene M., 2006. "Is There Hedge Fund Contagion?," Working Paper Series 2006-1, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    15. Fricke, Christoph & Menkhoff, Lukas, 2014. "Financial conditions, macroeconomic factors and (un)expected bond excess returns," Discussion Papers 35/2014, Deutsche Bundesbank.
    16. Mr. Manmohan Singh & James Aitken, 2010. "The (Sizable) Role of Rehypothecation in the Shadow Banking System," IMF Working Papers 2010/172, International Monetary Fund.
    17. Tobias Adrian & Adam B. Ashcraft & Nicola Cetorelli, 2013. "Shadow bank monitoring," Staff Reports 638, Federal Reserve Bank of New York.
    18. John Kambhu, 2006. "Trading risk, market liquidity, and convergence trading in the interest rate swap spread," Economic Policy Review, Federal Reserve Bank of New York, vol. 12(May), pages 1-13.
    19. Michael J. Fleming & Warren B. Hrung & Frank M. Keane, 2009. "The Term Securities Lending Facility: origin, design, and effects," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 15(Feb).
    20. Hartmann, Daniel & Kempa, Bernd & Pierdzioch, Christian, 2008. "Economic and financial crises and the predictability of U.S. stock returns," Journal of Empirical Finance, Elsevier, vol. 15(3), pages 468-480, June.
    21. Boyson, Nicole M. & Stahel, Christof W. & Stulz, Rene M., 2011. "Liquidity Shocks and Hedge Fund Contagion," Working Paper Series 2011-12, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    22. James O'Brien & Jeremy Berkowitz, 2005. "Estimating Bank Trading Risk: A Factor Model Approach," NBER Working Papers 11608, National Bureau of Economic Research, Inc.

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