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  1. Do Banks Hedge Using Interest Rate Swaps?
    Author: McPhail, Lihong Lu; Schnabl, Philipp; Tuckman, Bruce
    Published: April 2023
    Publisher:  National Bureau of Economic Research, Cambridge, Mass

    We ask whether banks use interest rate swaps to hedge the interest rate risk of their assets, primarily loans and securities. To this end, we use regulatory data on individual swap positions for the largest 250 U.S. banks. We find that the average... more

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    Sächsische Landesbibliothek - Staats- und Universitätsbibliothek Dresden
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    Universitätsbibliothek Freiburg
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    Helmut-Schmidt-Universität, Universität der Bundeswehr Hamburg, Universitätsbibliothek
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    Staats- und Universitätsbibliothek Hamburg Carl von Ossietzky
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    Technische Informationsbibliothek (TIB) / Leibniz-Informationszentrum Technik und Naturwissenschaften und Universitätsbibliothek
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    ZBW - Leibniz-Informationszentrum Wirtschaft, Standort Kiel
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    We ask whether banks use interest rate swaps to hedge the interest rate risk of their assets, primarily loans and securities. To this end, we use regulatory data on individual swap positions for the largest 250 U.S. banks. We find that the average bank has a large notional amount of swaps-- $434 billion, or more than 10 times assets. But after accounting for the significant extent to which swap positions offset each other, the average bank has essentially no net interest rate risk from swaps: a 100-basis-point increase in rates increases the value of its swaps by 0.1% of equity. There is variation across banks, with some bank swap positions decreasing and some increasing with rates, but aggregating swap positions at the level of the banking system reveals that most swap exposures are offsetting. Therefore, as a description of prevailing practice, we conclude that swap positions are not economically significant in hedging the interest rate risk of bank assets

     
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    Source: Union catalogues
    Language: English
    Media type: Book
    Format: Online
    Series: NBER working paper series ; no. w31166
    Subjects: Bank; Zinsderivat; Zinsrisiko; Hedging; Swap; USA; Banks; Depository Institutions; Micro Finance Institutions; Mortgages; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    Scope: 1 Online-Ressource, illustrations (black and white)
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    Hardcopy version available to institutional subscribers
  2. When do Treasuries Earn the Convenience Yield?
    A Hedging Perspective
    Author: Acharya, Viral V.; Laarits, Toomas
    Published: November 2023
    Publisher:  National Bureau of Economic Research, Cambridge, Mass

    We document that the convenience yield of U.S. Treasuries exhibits properties that are consistent with a hedging perspective of safe assets. The convenience yield tends to be low when the covariance of Treasury returns with the aggregate stock market... more

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    Sächsische Landesbibliothek - Staats- und Universitätsbibliothek Dresden
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    Universitätsbibliothek Freiburg
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    Location:
    Helmut-Schmidt-Universität, Universität der Bundeswehr Hamburg, Universitätsbibliothek
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    No inter-library loan

    Location:
    Staats- und Universitätsbibliothek Hamburg Carl von Ossietzky
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    No inter-library loan

    Location:
    Technische Informationsbibliothek (TIB) / Leibniz-Informationszentrum Technik und Naturwissenschaften und Universitätsbibliothek
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    No inter-library loan

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    ZBW - Leibniz-Informationszentrum Wirtschaft, Standort Kiel
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    No inter-library loan

     

    We document that the convenience yield of U.S. Treasuries exhibits properties that are consistent with a hedging perspective of safe assets. The convenience yield tends to be low when the covariance of Treasury returns with the aggregate stock market returns is high. A decomposition of the aggregate stock-bond covariance into terms corresponding to the convenience yield, the frictionless risk-free rate, and default risk reveals that the covariance between stock returns and the convenience yield itself drives the effect in a substantive capacity. We show the convenience yield is reduced with heightened inflation expectations that erode the hedging properties of U.S. Treasuries and other fixed-income money-like assets, inducing a switch to alternatives such as gold; it is also reduced immediately prior to debt-ceiling standoffs and with increases in Treasury supply

     
    Export to reference management software   RIS file
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    Source: Union catalogues
    Language: English
    Media type: Book
    Format: Online
    Series: NBER working paper series ; no. w31863
    Subjects: Rendite; Staatspapier; Hedging; Anlageverhalten; USA; Money and Interest Rates; Monetary Policy, Central Banking, and the Supply of Money and Credit; International Finance; Portfolio Choice; Investment Decisions; Asset Pricing; Trading Volume; Bond Interest Rates; International Financial Markets
    Scope: 1 Online-Ressource, illustrations (black and white)
    Notes:

    Hardcopy version available to institutional subscribers