[3Rin4] Interactive 1

[3Rin4-11] A Network Analysis of the JGB Repo Market

Takumi HORIKAWA¹, Yujiro MATSUI¹, 〇Yasufumi GEMMA¹ (1.Bank of Japan)

Keywords:Network Analysis, Financial Markets, Repo Transactions, PageRank, Community Detection

The repo market plays a key role in facilitating cash/securities in financial markets; an attention should thus be paid to its functioning. Exploring the network topology of the granular data newly collected by the Bank of Japan, this paper provides an overview of characteristics of the Japanese government bond repo market. Extracting highly important market participants and examining their positions in the hierarchical cash/securities flow structure by the PageRank algorithm and bow-tie decomposition, they are indicated to act as intermediaries. Additionally, a community detection analysis demonstrates that a community is formed for each major dealer, and many market participants tend to form continued relationships within a specific community. While these findings may indicate efficiency of repo market transactions, the market functioning may be prone to decline by negative shocks spreading through the network. It is therefore important to monitor the repo market functioning continually with these network characteristics in mind.