Special Repo Rates: An Empirical Analysis

  • Author(s): BRADFORD D. JORDAN, SUSAN D. JORDAN
  • Published: Apr 18, 2012
  • Pages: 2051-2072
  • DOI: 10.1111/j.1540-6261.1997.tb02750.x

ABSTRACT

Duffie (1996) examines the theoretical impact of repo “specials” on the prices of Treasury securities and concludes that, all else the same, an issue on special will carry a higher price than an otherwise identical issue. We examine this hypothesis and find strong evidence in support of it. We also examine whether the liquidity premium associated with “on‐the‐run” issues is due to repo specialness and find evidence of a distinct effect. Finally, we investigate whether auction tightness and percentage awarded to dealers are related to subsequent specialness and find that both variables àre generally significant.

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