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Cross‐Border Auction Cycle Effects of Sovereign Bond Issuance in the Euro Area
Author(s) -
BEETSMA ROEL,
GIULIODORI MASSIMO,
HANSON JESPER,
DE JONG FRANK
Publication year - 2018
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/jmcb.12510
Subject(s) - sovereign debt , volatility (finance) , bond market , common value auction , secondary market , monetary economics , bond , sovereignty , economics , debt , business , financial economics , finance , microeconomics , politics , political science , stock exchange , law
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.