markets association has recommended closure or early closure. for example, we saw modest, transitory upticks in dispersion on march 24, 2016 ( good friday ) and december 23, 2016 ( the business day before the christmas holiday ). a similar uptick was observed on november 23, 2016 ( the day before thanksgiving ). 29 in the measure that combines both markets, we see dispersion fall on month - and quarter - end dates ; this occurs because rates tend to fall in the unsecured market on these dates, pushing them closer together. 30 i discussed these factors in my february 2016 speech. 31 some government - sponsored entities can also participate in the dealer - to - dealer market. 32 this is due to covered interest rate parity : the proposition that the interest rate differential between two currencies of a given tenor should equal the differential between the spot exchange rate and the future exchange rate of the same tenor. see borio, mccauley, mcguire and sushko, “ covered interest parity lost : understanding the cross - currency basis, ” september 2016. 33 counterparty risk may have risen somewhat since the crisis. however, in the absence of acute financial stress, the impact of counterparty risk on interest rates paid by well - capitalized financial firms is likely to be quite modest for overnight or short - term tenors. 34 in other jurisdictions there is also evidence that a restricted supply of good collateral is exacerbating the impact of these factors. 12 / 13 bis central bankers'speeches 35 a number of other factors have likely been relevant at the margin. for example, monetary policy divergence across currency areas, and shortages of high - quality foreign collateral, may have put pressure on fx swap markets. see nakaso, “ monetary policy divergence and global financial stability : from the perspective of demand and supply of safe assets, ” january 20, 2017. 36 much net borrowing in interdealer repo comes from smaller or less creditworthy dealers, and a large portion of foreign exchange swap borrowing market appears to come from firms that have large dollar asset holdings and copious foreign - currency financing, but that lack a u. s. deposit base or direct wholesale dollar money market presence. to the extent that these firms had previously had access to financing from money market funds, in many cases this came from prime funds, which as i mentioned earlier have shrunk considerably. the apparently short - run inelastic demand for funds from these

reduce balance sheet size at period - end dates affect domestic money market integration, and integration across different global money markets, just as they affect the link between unsecured markets and ior that i discussed earlier. these pressures are made more acute by inelastic demand for wholesale dollar funding from some firms that hold large dollar loan and securities portfolios but lack access to dollar deposits or to direct funding from money market funds. 36 prognosis on the whole, these shifts in broad money market spreads do not pose a problem for monetary policy formulation or implementation. although libor and some other spreads are wider, they are, on average over time, generally stable and slow - moving, and as a result forecasters are able to incorporate any effect these spreads might have when formulating their projections for monetary policy. changes in the policy rate continue to be passed through predictably into all these markets, as recently observed. transitory, predictable and non - disruptive increases in period - end volatility are unlikely to meaningfully affect the real economy. and finally, there is evidence that the wider spreads among market rates that came out of money market fund reform are gradually closing over time, as firms adapt to the new structure of money markets by adjusting their portfolios and identifying new counterparties. however, if market dispersion were to increase too much, this could cause a variety of challenges. such dispersion could affect monetary transmission, altering the price of credit made available to certain borrowers. this could complicate the formulation of monetary policy if it were to become harder for policymakers to anticipate the impact on the economy that would ensue from future changes to the federal funds rate. such dispersion could also affect the use of our operations. 37 as i have noted, it seems that much of the recent shift in money market dispersion has arisen as a byproduct of important regulatory improvements to improve the safety and soundness of the global financial system. money market fund reform is now in place, and while the leverage ratio and many other basel iii rules are not fully in force, in practice most banks are complying with them. as a result, what we have observed in money markets might simply have reflected a oneoff realignment of asset prices to the new enhanced regulatory structure. 9 / 13 bis central bankers'speeches conclusion to conclude : i continue to be greatly encouraged by the performance of our framework for policy implementation, which has provided the fom