Special repo rates: An empirical analysis

Duffie (1996) examines the theoretical impact of repo ''specials'' on the prices of Treasury securities and concludes that, all else the same, an issue on special will carry a higher price than an otherwise identical issue. We examine this hypothesis and find strong evidence in support of it. We also examine whether the liquidity premium associated with ''on-the-run'' issues is due to repo specialness and find evidence of a distinct effect. Finally, we investigate whether auction tightness and percentage awarded to dealers are related to subsequent specialness and find that both variables are generally significant.