The Intraday Price of Money: evidence from the e-mid interbank market

We provide empirical evidence, based on tick-by-tick data for the e-MID euro\r\narea interbank market covering 2003 and 2004, that the overnight interest\r\nrate shows a clear downward pattern throughout the operating day. Thus, a\r\npositive hourly interest rate (half basis point) implicitly emerges from the\r\nintraday term structure of the overnight rate. Such a pattern was not detected\r\nin the mid-1990s: we explain this evolution as an outcome of the recent\r\ntrend toward real-time settlement. The estimated intraday interest rate is\r\nlower than in the United States: this is due to the different cost of central\r\nbank daylight credit.