Working Paper No. 46
By Spencer Dale and Marco Rossi
The United Kingdom is due to move to a system of real-time gross settlement (RTGS) later this year. This in theory could lead to the creation of a market for intra-day funds and an extention of the yield curve back beyond its current shortest maturity of one day. This paper considers the form a market of this sort might take and provides an explicit derivation of the intra-day yield curve. The paper also considers the potential for spillover between the provision of intra-day liquidity to support the RTGS operation and a central bank's ability to implement monetary policy via its control over short-term interest rates.