Which of the following transactions would have the effect of shortening the average duration of liabilities in the banking book?
A) selling holdings of 30-year German Government bonds
B) replacing retail savings accounts with 3-month borrowings under repo
C) selling futures contracts on 30-year German Government bonds
D) placing a 20-year covered bond in the market

Question

Quizplus · Accepted Answer

Replacing retail savings accounts with 3-month borrowings under repo would shorten the duration of liabilities in the banking book as the maturity of the borrowings is shorter than that of the savings accounts. Selling holdings of 30-year German Government bonds, selling futures contracts on 30-year German Government bonds, and placing a 20-year covered bond in the market would not necessarily have the same effect on the duration of liabilities.

Which of the Following Transactions Would Have the Effect of Shortening