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A policy-driven preferred habitat in the Turkish Government bond market

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  • Çelebi, Ali İzzeddin
  • Demir, Alper Tunga
  • Özbekler, Ali Gencay

Abstract

The pricing dynamics of government bond auctions offer valuable insights into investor behavior. By analyzing Turkish government bond re-issuances, we identify the factors influencing the disparity between primary market (auction) yields and secondary market yields, known as the auction premium. Our findings reveal that pre-auction price drift, the share of unpriced bids, and the fiscal stance are significant determinants of the auction premium. Additionally, our results show that the Securities Maintenance Practice generally leads to an increase in auction premiums. However, bonds with affected maturities exhibit a lower premium, indicating the presence of a policy-induced preferred habitat.

Suggested Citation

  • Çelebi, Ali İzzeddin & Demir, Alper Tunga & Özbekler, Ali Gencay, 2025. "A policy-driven preferred habitat in the Turkish Government bond market," Economics Letters, Elsevier, vol. 246(C).
    • Handle: RePEc:eee:ecolet:v:246:y:2025:i:c:s0165176524005494
    DOI: 10.1016/j.econlet.2024.112065
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    References listed on IDEAS

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    1. 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.
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    3. Beetsma, Roel & Giuliodori, Massimo & Hanson, Jesper & de Jong, Frank, 2018. "Bid-to-cover and yield changes around public debt auctions in the euro area," Journal of Banking & Finance, Elsevier, vol. 87(C), pages 118-134.
    4. Giese, Julia & Joyce, Michael & Meaning, Jack & Worlidge, Jack, 2024. "Do preferred habitat investors exist? Evidence from the UK government bond market," Economics Letters, Elsevier, vol. 234(C).
    5. Dong Lou & Hongjun Yan & Jinfan Zhang, 2013. "Anticipated and Repeated Shocks in Liquid Markets," The Review of Financial Studies, Society for Financial Studies, vol. 26(8), pages 1891-1912.
    6. Rui Albuquerque & José Miguel Cardoso-Costa & José Afonso Faias, 2024. "Price elasticity of demand and risk-bearing capacity in sovereign bond auctions," The Review of Financial Studies, Society for Financial Studies, vol. 37(10), pages 3149-3187.
    7. Krishnamurthy, Arvind, 2002. "The bond/old-bond spread," Journal of Financial Economics, Elsevier, vol. 66(2-3), pages 463-506.
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