Cross‐Border Auction Cycle Effects of Sovereign Bond Issuance in the Euro Area. Issue 7 (24th May 2018)

• Record Type: Journal Article
• Authors: BEETSMA, ROEL; GIULIODORI, MASSIMO; HANSON, JESPER; DE JONG, FRANK
• Is Part Of: Journal of money, credit, and banking. Volume 50:Issue 7(2018)
• Page Start: 1401
• Page End: 1440
• Publication Date: 2018-05-24
• Subjects: G12 -- G18 -- auctions -- auction cycles -- cross‐border effects -- public debt -- crisis -- primary dealers -- limited risk‐bearing capacity -- primary markets -- secondary markets; Banks and banking -- Periodicals; Credit -- Periodicals; Money -- Periodicals; 332
• DOI: 10.1111/jmcb.12510
• Languages: English
• ISSNs: 0022-2879

Abstract

Abstract: We provide evidence for the euro area of spillovers from foreign public debt auctions into domestic secondary‐market auction cycles. We also confirm existing evidence of such spillovers from domestic issues into the domestic secondary market. Consistent with a theory of primary dealers' limited risk‐bearing capacity, we find that auction cycles from domestic issues are stronger during the recent crisis period, whereas cross‐border effects are stronger in the precrisis period, but this evidence is not strong. This finding likely reflects the opposing effects of reduced sovereign bond market integration during the crisis and higher yield covariances caused by more market volatility.