Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/319642 
Year of Publication: 
2025
Series/Report no.: 
CFR Working Paper No. 25-05
Publisher: 
University of Cologne, Centre for Financial Research (CFR), Cologne
Abstract: 
I provide the first systematic analysis of collateral choices in one of the main short-term funding markets, the repurchase agreement (repo) market. In repos, long-term bonds serve as collateral connecting short-term and long-term funding markets. In general collateral repos, banks can choose from a list of eligible bonds. Surprisingly, they often deliver more expensive on-the-run bonds rather than cheapest-to-post securities. I rationalize this behaviour using a theoretical model linking the repo and bond markets. My results are relevant for explaining bond market patterns that are different in the euro area compared to the United States.
Subjects: 
Funding
Liquidity
Collateral
Repo
Bond
On-the-run
JEL: 
E40
E41
E43
G00
G01
G10
Document Type: 
Working Paper

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