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Pledged Collateral Market's Role in Transmission to Short-Term Market Rates
by Manmohan Singh and Rohit Goel

Series:Working Paper No. 19/106
ISBN 9781498312790
Code: #WPIEA2019106

Publication year: 2019

Cdn: $27.00; US: $25.00
Paperback
Language: English
21 pages
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In global financial centers, short-term market rates are effectively determined in the pledged collateral market, where banks and other financial institutions exchange collateral (such as bonds and equities) for money. Furthermore, the use of long-dated securities as collateral for short tenors—or example, in securities-lending and repo markets, and prime brokerage funding—impacts the risk premia (or moneyness) along the yield curve. In this paper, we deploy a methodology to show that transactions using long dated collateral also affect short-term market rates. Our results suggest that the unwind of central bank balance sheets will likely strengthen the monetary policy transmission, as dealer balance-sheet space is now relatively less constrained, with a rebound in collateral reuse.
Pledged Collateral Market's Role in Transmission to Short-Term Market Rates
Cdn: $27.00; US: $25.00
International Monetary Fund (IMF) BookID: 125117 Added: 2019.6.14