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Uncollateralized Overnight Loans Settled in LVTS

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  • Scott Hendry
  • Nadja Kamhi

Abstract

Loan-level data on the uncollateralized overnight loan market is generated using payment data from Canada's Large Value Transfer System (LVTS) and a modified version of the methodology proposed in Furfine (1999). There were on average just under 100 loans extended in this market each day from March 2004 to March 2006 for a total daily value of about $5 billion. This makes the market slightly larger than the brokered repo market but only about one-tenth of the estimate for the direct trade repo market. The implied uncollateralized overnight rate was found to be remarkably stable relative to other measures of the overnight rate. Loan rates are found to vary with market conditions, the size of the loan, and the type (big vs. small) of the borrower and lender.

Suggested Citation

  • Scott Hendry & Nadja Kamhi, 2007. "Uncollateralized Overnight Loans Settled in LVTS," Staff Working Papers 07-11, Bank of Canada.
    • Handle: RePEc:bca:bocawp:07-11
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    References listed on IDEAS

    as
    1. Chris D'Souza, 2007. "Where Does Price Discovery Occur in FX Markets?," Staff Working Papers 07-52, Bank of Canada.
    2. Demiralp, Selva & Preslopsky, Brian & Whitesell, William, 2006. "Overnight interbank loan markets," Journal of Economics and Business, Elsevier, vol. 58(1), pages 67-83.
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    Citations

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    Cited by:

    1. Luca Arciero & Ronald Heijmans & Richard Heuver & Marco Massarenti & Cristina Picillo & Francesco Vacirca, 2016. "How to Measure the Unsecured Money Market: The Eurosystem’s Implementation and Validation Using TARGET2 Data," International Journal of Central Banking, International Journal of Central Banking, vol. 12(1), pages 247-280, March.
    2. repec:tiu:tiucen:bd09917e-4277-418c-8d8e-5bd5b8439fd3 is not listed on IDEAS
    3. Luca Arciero & Ronald Heijmans & Richard Heuver & Marco Massarenti & Cristina Picillo & Francesco Vacirca, 2016. "How to Measure the Unsecured Money Market: The Eurosystem’s Implementation and Validation Using TARGET2 Data," International Journal of Central Banking, International Journal of Central Banking, vol. 12(1), pages 247-280, March.
    4. Olivier Armantier & Adam Copeland, 2012. "Assessing the quality of “Furfine-based” algorithms," Staff Reports 575, Federal Reserve Bank of New York.
    5. Anthony Brassil & Helen Hughson & Mark McManus, 2016. "Identifying Interbank Loans from Payments Data," RBA Research Discussion Papers rdp2016-11, Reserve Bank of Australia.
    6. Luca Arciero & Ronald Heijmans & Richard Heuver & Marco Massarenti & Cristina Picillo & Francesco Vacirca, 2014. "How to measure the unsecured money market? The Eurosystem�s implementation and validation using TARGET2 data," Questioni di Economia e Finanza (Occasional Papers) 215, Bank of Italy, Economic Research and International Relations Area.
    7. Nellie Zhang, 2015. "Changes in Payment Timing in Canada’s Large Value Transfer System," Staff Working Papers 15-20, Bank of Canada.
    8. Carlos León & Jorge Cely & Carlos Cadena, 2016. "Identifying Interbank Loans, Rates, and Claims Networks from Transactional Data," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 85, pages 91-125, Julio - D.
    9. Bartolini, Leonardo & Hilton, Spence & McAndrews, James J., 2010. "Settlement delays in the money market," Journal of Banking & Finance, Elsevier, vol. 34(5), pages 934-945, May.
    10. Edoardo Rainone & Francesco Vacirca, 2020. "Estimating the money market microstructure with negative and zero interest rates," Quantitative Finance, Taylor & Francis Journals, vol. 20(2), pages 207-234, February.
    11. Anna Kovner & David R. Skeie, 2013. "Evaluating the quality of fed funds lending estimates produced from Fedwire payments data," Staff Reports 629, Federal Reserve Bank of New York.
    12. László Bodnár & Miklós Luspay & Cecília Pintér, 2015. "Timing characteristics of overnight unsecured interbank transactions in VIBER," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 14(4), pages 126-154.
    13. León, C. & Cely, Jorge & Cadena, Carlos, 2015. "Identifying Interbank Loans, Rates, and Claims Networks from Transactional Data," Other publications TiSEM ccd49709-e1d5-4da9-bf85-8, Tilburg University, School of Economics and Management.
    14. Olivier Armantier & Adam Copeland, 2015. "Challenges in identifying interbank loans," Economic Policy Review, Federal Reserve Bank of New York, issue 21-1, pages 1-17.

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    More about this item

    Keywords

    Financial markets; Interest rates;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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