Overnight interbank loan markets
This paper investigates transactions and interest rates on brokered and direct trades in federal funds, Eurodollar transactions, and repurchase agreements, all of which are used by banks in overnight funding. We expand on earlier work on calendar-day effects in these markets, investigating also volumes of funding in recent years. Our data include daily trades in federal funds reported by major brokers and also records of uncollateralized transactions over the wire transfer system operated by the Federal Reserve. We find that the share of the overnight interbank loan market represented by brokered fed funds has decreased and is now only about one-third of the total. We also show evidence of close but incomplete arbitrage among the major segments of the overnight interbank market, though the specific calendar day patterns of spreads and volatilities have evolved relative to the literature using earlier sample periods.
|Date of creation:||2004|
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Journal of Banking & Finance,
Elsevier, vol. 29(5), pages 1131-1152, May.
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- Furfine, Craig H, 2003. " Interbank Exposures: Quantifying the Risk of Contagion," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(1), pages 111-128, February.
- Stacy Panigay Coleman, 2002. "The evolution of the Federal Reserve's intraday credit policies," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Feb, pages 67-84.
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