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Sovereign bond markets when auctions take place: Evidence from Italy

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  • Cafiso, Gianluca

Abstract

Auctions of sovereign bonds are found to influence the market yield days before they take place and underpricing is usually spotted when their outcome is compared with contemporaneous market quotes. The objective of our research is to investigate deeper these two findings, by considering also the underlying macroeconomic conditions. We study Italy, which is one of the world’s largest debt issuers. Our results suggest that the so-called auction cycle emerges only at times of high volatility and they do not signal underpricing when an exact matching between the auctioned bond and the market quote used is ensured.

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  • Cafiso, Gianluca, 2019. "Sovereign bond markets when auctions take place: Evidence from Italy," The North American Journal of Economics and Finance, Elsevier, vol. 47(C), pages 406-430.
    • Handle: RePEc:eee:ecofin:v:47:y:2019:i:c:p:406-430
    DOI: 10.1016/j.najef.2018.06.004
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    More about this item

    Keywords

    Primary market; Secondary market; MTS market; Treasury auctions; Sovereign bonds; Market micro-structure;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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