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Price effects of sovereign debt auctions in the euro-zone: The role of the crisis

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  • Beetsma, Roel
  • Giuliodori, Massimo
  • de Jong, Frank
  • Widijanto, Daniel

Abstract

We show that new public debt issues cause an auction cycle for Italian secondary-market debt, but not for German debt. The cycle is mainly observed for the crisis period since mid-2007 and is larger when the crisis, as measured by yield volatility and CDS spreads of primary dealers, is more intense. Volatility seems to be the main driving factor. The cycle is also present in secondary-market series with maturities close to the auctioned series. Our findings are consistent with the theory of primary dealers’ limited risk-bearing capacity. There is also weak evidence of spill-overs from foreign auctions to domestic markets.

Suggested Citation

  • Beetsma, Roel & Giuliodori, Massimo & de Jong, Frank & Widijanto, Daniel, 2016. "Price effects of sovereign debt auctions in the euro-zone: The role of the crisis," Journal of Financial Intermediation, Elsevier, vol. 25(C), pages 30-53.
  • Handle: RePEc:eee:jfinin:v:25:y:2016:i:c:p:30-53
    DOI: 10.1016/j.jfi.2014.11.004
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    Cited by:

    1. Szkup, Michal, 2017. "Preventing Self-fulfilling debt crises," MPRA Paper 82754, University Library of Munich, Germany.
    2. Beetsma, Roel & de Jong, Frank & Giuliodori, Massimo & Hanson, Jesper, 2016. "Domestic and Cross-Border Auction Cycle Effects of Sovereign Bond Issuance in the Euro Area," CEPR Discussion Papers 11122, C.E.P.R. Discussion Papers.
    3. repec:eee:jbfina:v:87:y:2018:i:c:p:118-134 is not listed on IDEAS
    4. 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.

    More about this item

    Keywords

    Public debt; Auctions; Crisis; Primary dealers;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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