Special Repo Rates: An Empirical Analysis

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...

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Bibliographic Details
Published in:The Journal of finance (New York) 1997-12, Vol.52 (5), p.2051-2072
Main Authors: JORDAN, BRADFORD D., JORDAN, SUSAN D.
Format: Article
Language:English
Subjects:
Agreements
Auctions
Capital market
Cash
Coefficients
Collateral
Economic models
Finance
Financial securities
Government obligations
Hypotheses
Inventory
Investors
Linear interpolation
Linear regression
Market prices
Premiums
Repurchase agreement
Repurchase agreements
Securities issues
Securities prices
Stock prices
Studies
Treasuries
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Summary: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 are generally significant.
ISSN:0022-1082
1540-6261
DOI:10.1111/j.1540-6261.1997.tb02750.x