Pledged Collateral Market's Role in Transmission to Short-Term Market Rates

by Manmohan Singh, Rohit Goel

Subject categories
ISBNs
  • 9781498312790
  • 9781498315890
  • 9781498315852
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.

  • International Monetary Fund; May 2019
  • ISBN: 9781498315890
  • Read online, or download in secure PDF or secure ePub format
  • Title: Pledged Collateral Market's Role in Transmission to Short-Term Market Rates
  • Author: Manmohan Singh; Rohit Goel
  • Imprint: INTERNATIONAL MONETARY FUND
Subject categories
ISBNs
  • 9781498312790
  • 9781498315890
  • 9781498315852
Subject categories
ISBNs
  • 9781498312790
  • 9781498315890
  • 9781498315852