IDEAS home Printed from https://ideas.repec.org/p/sas/wpaper/20143.html
   My bibliography  Save this paper

Italian Government debt liquidity, is it of value?

Author

Listed:
  • Simona Delle Chiaie

    (Banque de France)

  • Bernardo Maggi

    (Sapienza Universita' di Roma)

Abstract

In this paper we analyze the yield difference between two on- and off-the-run similar notes to gauge the liquidity premium. We investigate this issue by relating such a differential to several liquidity indicators that we build and examine -to our knowledge for the first time- throughout the entire life of the Italian Government securities. We provide evidence on the differences between the US and the Italian security markets, calculate accurately the joint and the total probability for liquidity shocks and provide a methodology to cope with the resilience of a liquidity shock and its implications in terms of issuance policies

Suggested Citation

  • Simona Delle Chiaie & Bernardo Maggi, 2014. "Italian Government debt liquidity, is it of value?," DSS Empirical Economics and Econometrics Working Papers Series 2014/3, Centre for Empirical Economics and Econometrics, Department of Statistics, "Sapienza" University of Rome.
  • Handle: RePEc:sas:wpaper:20143
    as

    Download full text from publisher

    File URL: http://www.dss.uniroma1.it/RePec/sas/wpaper/20143_mdc.pdf
    File Function: First version, 2014
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Francisco Alonso & Roberto Blanco & Ana Del Rio & Alicia Sanchis, 2004. "Estimating liquidity premia in the Spanish government securities market," The European Journal of Finance, Taylor & Francis Journals, vol. 10(6), pages 453-474.
    2. Dong Lou & Hongjun Yan & Jinfan Zhang, 2013. "Anticipated and Repeated Shocks in Liquid Markets," Review of Financial Studies, Society for Financial Studies, vol. 26(8), pages 1891-1912.
    3. Pasquariello, Paolo & Vega, Clara, 2009. "The on-the-run liquidity phenomenon," Journal of Financial Economics, Elsevier, vol. 92(1), pages 1-24, April.
    4. David Goldreich & Bernd Hanke & Purnendu Nath, 2005. "The Price of Future Liquidity: Time-Varying Liquidity in the U.S. Treasury Market," Review of Finance, European Finance Association, vol. 9(1), pages 1-32.
    5. Edwin J. Elton & T. Clifton Green, 1998. "Tax and Liquidity Effects in Pricing Government Bonds," Journal of Finance, American Finance Association, vol. 53(5), pages 1533-1562, October.
    6. Coluzzi, Chiara & Ginebri, Sergio & Turco, Manuel, 2008. "Measuring and Analyzing the Liquidity of the Italian Treasury Security Wholesale Secondary Market," Economics & Statistics Discussion Papers esdp08044, University of Molise, Department of Economics.
    7. Balduzzi, Pierluigi & Elton, Edwin J. & Green, T. Clifton, 2001. "Economic News and Bond Prices: Evidence from the U.S. Treasury Market," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 36(4), pages 523-543, December.
    8. Bernardo Maggi & Fabrizio Infortuna, 2008. "Assessing Italian Government bonds' term structure with CIR model in the aftermath of EMU," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 4(3), pages 163-170.
    9. Amihud, Yakov & Mendelson, Haim, 1991. "Liquidity, Maturity, and the Yields on U.S. Treasury Securities," Journal of Finance, American Finance Association, vol. 46(4), pages 1411-1425, September.
    10. Michael J. Fleming & Eli M. Remolona, 1999. "Price Formation and Liquidity in the U.S. Treasury Market: The Response to Public Information," Journal of Finance, American Finance Association, vol. 54(5), pages 1901-1915, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Eleonora Cavallaro & Bernardo Maggi, 2014. "State of confidence, overborrowing and the macroeconomic stabilization puzzle," DSS Empirical Economics and Econometrics Working Papers Series 2014/2, Centre for Empirical Economics and Econometrics, Department of Statistics, "Sapienza" University of Rome.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Diaz, Antonio & Merrick, John Jr. & Navarro, Eliseo, 2006. "Spanish Treasury bond market liquidity and volatility pre- and post-European Monetary Union," Journal of Banking & Finance, Elsevier, vol. 30(4), pages 1309-1332, April.
    2. Coluzzi, Chiara & Ginebri, Sergio & Turco, Manuel, 2008. "Measuring and Analyzing the Liquidity of the Italian Treasury Security Wholesale Secondary Market," Economics & Statistics Discussion Papers esdp08044, University of Molise, Department of Economics.
    3. Díaz, Antonio & Escribano, Ana, 2017. "Liquidity measures throughout the lifetime of the U.S. Treasury bond," Journal of Financial Markets, Elsevier, vol. 33(C), pages 42-74.
    4. Jieun Lee, 2018. "Who Improves or Worsens Liquidity in the Korean Treasury Bond Market?," Working Papers 2018-3, Economic Research Institute, Bank of Korea.
    5. repec:dau:papers:123456789/11155 is not listed on IDEAS
    6. O’Sullivan, Conall & Papavassiliou, Vassilios G., 2020. "On the term structure of liquidity in the European sovereign bond market," Journal of Banking & Finance, Elsevier, vol. 114(C).
    7. Caporale, Guglielmo Maria & Girardi, Alessandro & Paesani, Paolo, 2012. "Quoted spreads and trade imbalance dynamics in the European Treasury bond market," The Quarterly Review of Economics and Finance, Elsevier, vol. 52(2), pages 173-182.
    8. Stefania D'Amico & Roger Fan & Yuriy Kitsul, 2013. "The Scarcity Value of Treasury Collateral: Repo Market Effects of Security-Specific Supply and Demand Factors," Working Paper Series WP-2013-22, Federal Reserve Bank of Chicago.
    9. K. Lebedeva, 2015. "An Empirical Analysis of the Russian Financial Markets’ Liquidity and Returns," Review of Business and Economics Studies // Review of Business and Economics Studies, Финансовый Университет // Financial University, vol. 3(3), pages 5-31.
    10. Fleming, Michael J. & Mizrach, Bruce & Nguyen, Giang, 2018. "The microstructure of a U.S. Treasury ECN: The BrokerTec platform," Journal of Financial Markets, Elsevier, vol. 40(C), pages 2-22.
    11. de Jong, F.C.J.M. & Driessen, J.J.A.G., 2015. "Can large long-term investors capture illiquidity premiums," Other publications TiSEM 9c92b978-0099-44d3-9aab-8, Tilburg University, School of Economics and Management.
    12. Corradin, Stefano & Maddaloni, Angela, 2020. "The importance of being special: Repo markets during the crisis," Journal of Financial Economics, Elsevier, vol. 137(2), pages 392-429.
    13. Avouyi-Dovi, Sanvi & Idier, Julien, 2012. "The impact of unconventional monetary policy on the market for collateral: The case of the French bond market," Journal of Banking & Finance, Elsevier, vol. 36(2), pages 428-438.
    14. Jacob Boudoukh & Jordan Brooks & Matthew Richardson & Zhikai Xu, 2016. "The Complexity of Liquidity: The Extraordinary Case of Sovereign Bonds," NBER Working Papers 22576, National Bureau of Economic Research, Inc.
    15. Michael J. Fleming, 2003. "Measuring treasury market liquidity," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 83-108.
    16. Lee A. Smales, 2021. "The effect of treasury auctions on 10‐year Treasury note futures," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(S1), pages 1517-1555, April.
    17. Narayan Bulusu & Sermin Gungor, 2018. "Government of Canada Securities in the Cash, Repo and Securities Lending Markets," Discussion Papers 18-4, Bank of Canada.
    18. Smales, L.A., 2021. "Macroeconomic news and treasury futures return volatility: Do treasury auctions matter?," Global Finance Journal, Elsevier, vol. 48(C).
    19. Ejsing, Jacob & Grothe, Magdalena & Grothe, Oliver, 2015. "Liquidity and credit premia in the yields of highly-rated sovereign bonds," Journal of Empirical Finance, Elsevier, vol. 33(C), pages 160-173.
    20. Peter Hördahl & Eli M Remolona & Giorgio Valente, 2015. "Expectations and risk premia at 8:30am: Macroeconomic announcements and the yield curve," BIS Working Papers 527, Bank for International Settlements.
    21. William Lin & Shih-Chuan Tsai & David Sun, 2011. "Price informativeness and predictability: how liquidity can help," Applied Economics, Taylor & Francis Journals, vol. 43(17), pages 2199-2217.

    More about this item

    Keywords

    Treasury bonds market; liquidity; on/off-the-run cycle; liquidity shock probability; resilience.;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sas:wpaper:20143. 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: . General contact details of provider: https://edirc.repec.org/data/ddrosit.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Stefano Fachin (email available below). General contact details of provider: https://edirc.repec.org/data/ddrosit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.