Conference Agenda

Please note that all times are shown in the time zone of the conference. The current conference time is: 1st Nov 2024, 12:43:10am CET

 
 
Session Overview
Session
AP 08: Intermediaries and International Capital Markets (co-chaired by BlackRock)
Time:
Thursday, 17/Aug/2023:
1:30pm - 3:00pm

Session Chair: Egle Karmaziene, Vrije Universiteit Amsterdam
Session Chair: Monique Donders, BlackRock
Location: Auditorium (floor 1)


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Presentations
ID: 348

Intermediary Balance Sheets and the Treasury Yield Curve

Wenxin Du1, Ben Hebert2, Wenhao Li3

1University of Chicago and FRBNY; 2Stanford University; 3University of Southern California

Discussant: Sven Klingler (BI Norwegian Business School)

We document a regime change in the U.S. Treasury market post-Global Financial Crisis (GFC): dealers switched from net short to net long Treasury bonds. Consistent with this change, we derive ``net-long'' and ``net-short'' Treasury curves that account for dealers' balance sheet costs, and show that actual Treasury yields moved from the net short curve pre-GFC to the net long curve post-GFC. This regime change helps explain negative swap spreads post-GFC and the co-movement among swap spreads, dealer Treasury positions, yield curve slope, and covered-interest-parity violations, and implies changing effects for a wide range of monetary and regulatory policy interventions.



ID: 1949

Foreign Exchange Intervention with UIP and CIP Deviations: The Case of Small Safe Haven Economies

Kenza Benhima, Philippe Bacchetta, Brendan Berthold

HEC-Lausanne (University of Lausanne), Switzerland

Discussant: Xiang Fang (University of Hong Kong)

We examine the opportunity cost of foreign exchange (FX) intervention when both CIP and UIP deviations are present. We consider a small open economy that receives international capital flows through constrained international financial intermediaries. Deviations from CIP come from limited arbitrage or through a convenience yield, while UIP deviations are also affected by risk. We show that the sign of CIP and UIP deviations may differ for safe haven countries. We examine the optimal policy of a constrained central bank planner in this context. We find that there may be a benefit, rather than a cost, of FX reserves if international intermediaries value more the safe haven properties of a currency that domestic households. We show that this has been the case for the Swiss Franc and Japanese Yen.



ID: 1133

Can Time-Varying Currency Risk Hedging Explain Exchange Rates?

Leonie Braeuer1,2, Harald Hau1,2,3

1University of Geneva, Switzerland; 2Swiss Finance Institute; 3CEPR

Discussant: Angelo Ranaldo (University of St.Gallen)

The rise in net international bond positions of non-US investors over the last decade can account for the long-run surge in net dollar hedging positions in FX derivatives. The latter influence spot exchange rates through CIP arbitrage. Using intermediaries' capital ratio as a supply shifter, we identify a price inelastic derivative demand by institutional investors and document that changes in their net hedging positions can explain approximately 30% of all monthly variation in the seven most important dollar exchange rates from 2012 to 2022.



 
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