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Working Paper
International Dollar Flows
Using confidential Federal Reserve data, we study the factors driving U.S. banknote flows between the United States and other countries. These flows are a significant component of capital flows in emerging market economies, where physical U.S. currency functions as a safe asset and precautionary demand for U.S. banknotes is a form of flight to quality. Prior to the global financial crisis, country-specific factors, including local economic uncertainty, largely explain the volume and heterogeneity of the flows. Since the crisis, global factors, particularly, global economic uncertainty, ...
Discussion Paper
The Universe of Leveraged Bank Loan and High Yield Bond U.S. Mutual Funds
This note aims to characterize the universe of Bank Loan (BL) mutual funds (MFs) and compare it against that of High Yield Bond (HYB) MFs on several dimensions.
Working Paper
Reserve Balances, the Federal Funds Market and Arbitrage in the New Regulatory Framework
We study developments in reserve balances and the federal funds market in the context of two banking regulatory changes: the widening of the Federal Deposit Insurance Corporation (FDIC) assessment base and the introduction of the Basel III leverage ratio. Using a novel data set that includes FDIC fees and balance sheet data for depository institutions, we find that, as most foreign banks were not subject to the FDIC fee, they absorbed increasing amounts of reserve balances. Furthermore, foreign banks experienced positive and improving conditions for arbitraging between borrowing reserve ...
Discussion Paper
Hedge Fund Treasury Exposures, Repo, and Margining
Hedge funds have become among the most active participants in U.S. Treasury (UST) markets over the past decade. As a result, the financial stability vulnerabilities associated with their leveraged Treasury market exposures, which are facilitated by low or zero haircuts on their Treasury repo borrowing, have become more prominent.
Discussion Paper
Sizing hedge funds' Treasury market activities and holdings
Hedge funds play an increasingly important role in U.S. Treasury (UST) cash and futures markets, a role that has been widely discussed following the March 2020 U.S. Treasury sell-off. In this note, we analyze hedge funds' holdings of UST securities and their UST market activities in normal times and in times of financial market stress using regulatory data from the SEC Form PF.