Watering the Garden of Government Securities:Measuring the "Bunching" Effect in Euro Sovereign Bond Markets
The adoption of a common currency raised the degree of substitution between financial instruments supplied by EU Member States to finance their national debts. In this framework, our paper looks at a particular determinant of liquidity-related spreads in euro-area government bonds. Simultaneous issuance of similar bonds floods the market with paper and could lead to higher funding costs for sovereign borrowers. We test the significance of this problem, over-supplying liquidity due to a bunching of contemporaneous issues, in a government bond market where borrowers do not coordinate their issuance plans. We find that there is a significant relationship between bunching in issues and higher yield spreads. Moreover, in line with the existing literature, we find a negative correlation between liquidity and bond yields.
|Date of creation:|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.dt.tesoro.it|
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Poterba, James M. & Rueben, Kim S., 2001. "Fiscal News, State Budget Rules, and Tax-Exempt Bond Yields," Journal of Urban Economics, Elsevier, vol. 50(3), pages 537-562, November.
- Missale, Alessandro, 1999. "Public Debt Management," OUP Catalogue, Oxford University Press, number 9780198290858.
- Bernoth, Kerstin & von Hagen, Jürgen & Schuknecht, Ludger, 2004.
"Sovereign risk premia in the European government bond market,"
ZEI Working Papers
B 26-2003, University of Bonn, ZEI - Center for European Integration Studies.
- Bernoth, Kerstin & von Hagen, Jürgen & Schuknecht, Ludger, 2004. "Sovereign risk premia in the European government bond market," Working Paper Series 0369, European Central Bank.
- Biais, Bruno & Renucci, Antoine & Saint-Paul, Gilles, 2004. "Liquidity and the Cost of Funds in the European Treasury Market," IDEI Working Papers 285, Institut d'Économie Industrielle (IDEI), Toulouse.
When requesting a correction, please mention this item's handle: RePEc:itt:wpaper:wp2008-5. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michele Petrocelli)
If references are entirely missing, you can add them using this form.