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Zorka Simon

is an Assistant Professor at the Research Center SAFE of Goethe University Frankfurt. She earned her PhD in Finance from Tilburg University, then held a position at the University of Mannheim. She is also a junior research fellow of Netspar. Her research areas include empirical asset pricing, sovereign debt pricing, as well as liquidity and credit risk. Her most recent research considers the effect of regulatory changes and monetary policy on long-maturity sovereign bonds and the interaction between market liquidity and repo and securities lending market utilization of sovereign bonds in the Eurozone. More information can be found on her personal website: www.zorkasimon.com

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Zsuzsa R. Huszár and Zorka Simon: The Liquidity and Welfare Implications of the Securities Lending Market for European Treasuries

In low interest environments, pension and insurance funds struggle to generate returns on their treasury holdings. We propose that the expected future income from securities lending gives rise to a new form of convenience yield for high quality treasuries, such as German government bonds. The expected lending income not only influences secondary market yields but also auction outcomes by serving as a liquidity signal. Moreover, as banks engage in balance sheet window-dressing around reporting dates and withdraw from funding markets, the role of nonbank lenders becomes increasingly important to provide funding liquidity, which allows them to earn higher fees.

Last modified: 2018.11.30.