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Bidding and Performance in Repo Auctions: Evidence from ECB Open Market Operations

  • Bindseil, Ulrich
  • Nyborg, Kjell G
  • Strebulaev, Ilya

Repo auctions are multiunit auctions regularly used by central banks to inject liquidity into the banking sector. Banks have a fundamental need to participate because they have to satisfy reserve requirements. Superficially, repo auctions resemble treasury auctions; the format and rules are similar and there is an active secondary market for the underlying asset. Using a bidder level dataset of the European Central Bank’s main repo auctions, however, we find evidence that the economic issues in repo auctions may be very different. Unlike what has been documented in the treasury auctions literature, we find no evidence that private information and the winner’s curse are important issues. Instead our findings suggest that bidders are more concerned with the loser’s nightmare, collateral, and future interest rate reductions by the ECB. Small and large bidders use different strategies, with large bidders performing better.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4367.

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Date of creation: Apr 2004
Date of revision:
Handle: RePEc:cpr:ceprdp:4367
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  1. Hamilton, James D, 1996. "The Daily Market for Federal Funds," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 26-56, February.
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  9. Chatterjea, Arkadev & Jarrow, Robert A., 1998. "Market Manipulation, Price Bubbles, and a Model of the U.S. Treasury Securities Auction Market," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 33(02), pages 255-289, June.
  10. 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.
  11. Kjell G. Nyborg & Ilya A. Strebulaev, 2003. "Multiple Unit Auctions and Short Squeezes," Working Papers 2003.27, Fondazione Eni Enrico Mattei.
  12. 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.
  13. Samita Sareen & Ali Hortacsu, 2004. "Order Flow and the Formation of Dealer Bids: An Analysis of Information and Strategic Behavior in the Government of Canada Securities Auctions," Working Papers 2004.145, Fondazione Eni Enrico Mattei.
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  16. repec:oup:restud:v:44:y:1977:i:3:p:511-18 is not listed on IDEAS
  17. Nyborg, Kjell G. & Sundaresan, Suresh, 1996. "Discriminatory versus uniform Treasury auctions: Evidence from when-issued transactions," Journal of Financial Economics, Elsevier, vol. 42(1), pages 63-104, September.
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  19. Simon, David P., 1994. "Markups, quantity risk, and bidding strategies at treasury coupon auctions," Journal of Financial Economics, Elsevier, vol. 35(1), pages 43-62, February.
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