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How Auctions Reveal Information: A Case Study on German REPO Rates

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  • Nautz, Dieter

Abstract

Securities repurchase agreements (REPOs) have become the Bundesbank's most important tool for its ongoing money market management and the control of the monetary base. In the fall of 1988, the Bundesbank changed the applied auction rule in order to prevent banks from submitting exaggerated bids. Focusing on the information content of a resulting REPO rate, this paper investigates how German money market rates react to auction results. Evidence will be found that the response of the money market to a new REPO rate reflects the applied auction rule. Copyright 1997 by Ohio State University Press.

Suggested Citation

  • Nautz, Dieter, 1997. "How Auctions Reveal Information: A Case Study on German REPO Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 17-25, February.
    • Handle: RePEc:mcb:jmoncb:v:29:y:1997:i:1:p:17-25
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    Cited by:

    1. Stefania D'Amico & Roger Fan & Yuriy Kitsul, 2013. "The Scarcity Value of Treasury Collateral: Repo Market Effects of Security-Specific Supply and Demand Factors," Working Paper Series WP-2013-22, Federal Reserve Bank of Chicago.
    2. Arup Daripa, 2005. "How (Not) to Sell Money," Birkbeck Working Papers in Economics and Finance 0520, Birkbeck, Department of Economics, Mathematics & Statistics.
    3. Breitung, Jorg & Nautz, Dieter, 2001. "The empirical performance of the ECB's repo auctions: evidence from aggregated and individual bidding data," Journal of International Money and Finance, Elsevier, vol. 20(6), pages 839-856, November.
    4. Hartmann, Philipp & Manna, Michele & Manzanares, Andres, 2001. "The microstructure of the euro money market," Journal of International Money and Finance, Elsevier, vol. 20(6), pages 895-948, November.
    5. Linzert, Tobias & Schmidt, Sandra, 2007. "What Explains the Spread Between the Euro Overnight Rate and the ECB's Policy Rate?," ZEW Discussion Papers 07-076, ZEW - Leibniz Centre for European Economic Research.
    6. Ewerhart, Christian & Cassola, Nuno & Valla, Natacha, 2010. "Declining valuations and equilibrium bidding in central bank refinancing operations," International Journal of Industrial Organization, Elsevier, vol. 28(1), pages 30-43, January.
    7. Giamattei, Marcus & Lambsdorff, Johann Graf, 2019. "classEx — an online tool for lab-in-the-field experiments with smartphones," Journal of Behavioral and Experimental Finance, Elsevier, vol. 22(C), pages 223-231.
    8. Nautz, D. & Wolfstetter, E., 1997. "Bid shading and risk aversion in multi-unit auctions with many bidders," Economics Letters, Elsevier, vol. 56(2), pages 195-200, October.
    9. Sara Castellanos, 2001. "Mexican treasury securities primary auctions," Theory workshop papers 357966000000000025, UCLA Department of Economics.
    10. Ulrich Bindseil, 2002. "Central bank forecasts of liquidity factors and the control of short term interest rates," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 55(220), pages 13-37.
    11. Nautz, Dieter & Linzert, Tobias & Breitung, Jörg, 2003. "Bidder Behavior in Repo Auctions without Minimum Bid Rate: Evidence from the Bundesbank," Discussion Paper Series 1: Economic Studies 2003,13, Deutsche Bundesbank.
    12. Bindseil, Ulrich, 2001. "Central bank forecasts of liquidity factors: Quality, publication and the control of the overnight rate," Working Paper Series 0070, European Central Bank.
    13. Hartmann, Philipp & Manna, Michele & Manzanares, Andres, 2001. "The microstructure of the euro money market," Journal of International Money and Finance, Elsevier, vol. 20(6), pages 895-948, November.
    14. Fecht, Falko & Weber, Patrick, 2022. "Private value of central bank liquidity and Banks’ bidding behavior in variable rate tender auctions," Journal of Banking & Finance, Elsevier, vol. 136(C).
    15. Ulrich Bindseil, 2002. "Central bank forecasts of liquidity factors and the control of short term interest rates," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 55(220), pages 13-37.
    16. Buraschi, Andrea & Menini, Davide, 2002. "Liquidity risk and specialness," Journal of Financial Economics, Elsevier, vol. 64(2), pages 243-284, May.
    17. Linzert, Tobias & Schmidt, Sandra, 2008. "What explains the spread between the euro overnight rate and the ECB's policy rate?," Working Paper Series 983, European Central Bank.
    18. Manna, Michele, 2002. "Using money market rates to assess the alternatives of fixed vs. variable rate tenders: the lesson from 1989-1998 data for Germany," Working Paper Series 186, European Central Bank.
    19. Manna, Michele, 2002. "Using money market rates to assess the alternatives of fixed vs. variable rate tenders: the lesson from 1989-1998 data for Germany," Working Paper Series 0186, European Central Bank.
    20. Dieter Nautz & Christian J. Offermanns, 2007. "The dynamic relationship between the euro overnight rate, the ECB's policy rate and the term spread," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 12(3), pages 287-300.
    21. Abbassi, Puriya & Fecht, Falko & Weber, Patrick, 2013. "How stressed are banks in the interbank market?," Discussion Papers 40/2013, Deutsche Bundesbank.
    22. Nautz, Dieter & Offermanns, Christian J., 2008. "Volatility transmission in the European money market," The North American Journal of Economics and Finance, Elsevier, vol. 19(1), pages 23-39, March.
    23. Nautz, Dieter, 1998. "Banks' demand for reserves when future monetary policy is uncertain," Journal of Monetary Economics, Elsevier, vol. 42(1), pages 161-183, June.
    24. Singh, Bhupal & Dhal, Sarat C., 1998. "Repo auction formats, bidders' behaviour and money market response in India," MPRA Paper 12147, University Library of Munich, Germany.
    25. Sara Castellanos, 2001. "A New Empirical Study of the Mexican Treasury Securities Primary Auctions: Is there more underpricing?," Levine's Working Paper Archive 625018000000000206, David K. Levine.

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