Article ID Journal Published Year Pages File Type
960651 Journal of Financial Intermediation 2016 24 Pages PDF
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.

Related Topics
Social Sciences and Humanities Business, Management and Accounting Strategy and Management
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