Money Market Integration


  • The views expressed here are those of the authors and do not necessarily reflect those of the Federal Reserve Bank of New York or the IMF. We thank the management and staff of Euro Brokers—in particular Brian Clark, Walter Danielsson, and Joe D'Errico—for providing the critical data for this project and for several helpful conversations. (Since we obtained the data, Euro Brokers has become a subsidiary of BGC Partners and is now recognized as BGC Brokers.) We also thank Selva Demiralp and Bill Whitesell for sharing their data with us, Jian Wang and participants in various seminars for comments, and Svenja Gudell and Krista Schwarz for assistance in this project.


We use transaction-level data and detailed modeling of the high-frequency behavior of federal funds–Eurodollar spreads to provide evidence of strong integration of the U.S. markets for federal funds and Eurodollars, the two core components of the dollar money market. Our evidence of negligible federal funds–Eurodollar premia contrasts with previous findings of large and predictable premia, which have been interpreted as evidence of segmentation between the markets for federal funds and Eurodollars. Our results, however, are consistent with possible persistent segmentation within the global Eurodollar market. We document several patterns in the behavior of federal funds–Eurodollar spreads, including liquidity effects from trading volume to yield spreads' volatility.