Explaining repo specialness

[thumbnail of Open Access]
Text (Open Access) - Published Version
· Available under License Creative Commons Attribution Non-commercial No Derivatives.
· Please see our End User Agreement before downloading.
[thumbnail of IJFE_Explaining Repo Specialness.pdf]
Preview
Text - Accepted Version
· Please see our End User Agreement before downloading.
| Preview

Please see our End User Agreement.

It is advisable to refer to the publisher's version if you intend to cite from this work. See Guidance on citing.

Add to AnyAdd to TwitterAdd to FacebookAdd to LinkedinAdd to PinterestAdd to Email

Dufour, A. orcid id iconORCID: https://orcid.org/0000-0003-0519-648X, Marra, M. orcid id iconORCID: https://orcid.org/0000-0003-0810-7323, Sangiorgi, I. orcid id iconORCID: https://orcid.org/0000-0002-8344-9983 and Skinner, F. S. (2020) Explaining repo specialness. International Journal of Finance & Economics, 25 (2). pp. 172-196. ISSN 1099-1158 doi: 10.1002/ijfe.1746

Abstract/Summary

We study the dynamics of specialness for 1-day repo contracts on Italian government bonds over a 10-year sample period. As predicted by Duffie’s (1996) model, our results show that collateral supply is a significant factor for specialness. However, we enrich that finding by also showing a clear impact from repo liquidity, collateral riskiness, information uncertainty and short-selling proxies, revealing the importance of speculative bond demand for specialness. During crisis periods, bond fire sales and European Central Bank interventions also have a large impact on repo specialness. We identify recurrent patterns for specialness around bond auctions. Specialness increases steadily from the auction announcement date until a few days before the auction settlement date, which is consistent with overbidding behavior and a short selling of treasuries (via reverse repos) from primary dealers ahead of auctions.

Altmetric Badge

Item Type Article
URI https://reading-clone.eprints-hosting.org/id/eprint/84015
Identification Number/DOI 10.1002/ijfe.1746
Refereed Yes
Divisions Henley Business School > Finance and Accounting
Uncontrolled Keywords Repo specialness, short selling, fire sales, liquidity, auctions, high-frequency data
Publisher Wiley
Download/View statistics View download statistics for this item

Downloads

Downloads per month over past year

University Staff: Request a correction | Centaur Editors: Update this record

Search Google Scholar