The empirical performance of the ECB's repo auctions: evidence from aggregated and individual bidding data

Abstract

We analyze the empirical performance of the ECB's fixed rate tenders by estimating bid functions using aggregated and individual bidding data. The intention of the study is twofold. First, in view of the ECB's emphasis on the principle of equal treatment, we employ the aggregated data to compare the bidding behavior of German and non- German banks. Specifically, we investigate banks' overbidding and its response to opportunity cost and interest rate expectations. Second, we use the individual bidding data of German banks and estimate panel data models to investigate the impact of a bank's type on its bidding. The results indicate that large banks bid more informed or sophisticated than smaller banks with regard to interest rate expectations. However there is no evidence for a size-effect in banks' overbidding behavior.