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

R.M.W.J. Beetsma, M. Giuliodori, F.C.J.M. de Jong, D. Widijanto

Research output: Contribution to journalArticleScientificpeer-review

7 Citations (Scopus)
144 Downloads (Pure)

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.
Original languageEnglish
Pages (from-to)30-53
JournalJournal of Financial Intermediation
Volume25
Early online date4 Dec 2014
DOIs
Publication statusPublished - Jan 2016

Keywords

  • Public debt
  • auctions
  • crisis
  • primary dealers

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