Bid-to-cover and yield changes around public debt auctions in the euro area

R.M.W.J. Beetsma, M. Giuliodori, Frank de Jong, J. Hanson

Research output: Contribution to journalArticleScientificpeer-review

Abstract

Earlier research has shown that euro-area primary public debt markets affect secondary markets. We find that more successful auctions of euro area public debt, as captured by higher bid-to-cover ratios, lead to lower secondary-market yields following the auctions. This effect is stronger when market volatility is higher. We rationalize both findings using a simple theoretical model of primary dealer behavior, in which the primary dealers receive a signal about the value of the asset auctioned.
Original languageEnglish
Pages (from-to)118-134
JournalJournal of Banking & Finance
Volume87
DOIs
Publication statusPublished - Feb 2018

Keywords

  • public debt auctions
  • bid-to-cover ratios
  • primary and secondary markets
  • primary dealers
  • volatility

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