Bid-to-Cover and Yield Changes Around Public Debt Auctions in the Euro Area

49 Pages Posted: 16 May 2017

See all articles by Roel M. W. J. Beetsma

Roel M. W. J. Beetsma

University of Amsterdam - Research Institute in Economics & Econometrics (RESAM); European Commission; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); Tinbergen Institute; Netspar

Massimo Giuliodori

University of Amsterdam - Faculty of Economics & Econometrics (FEE); Tinbergen Institute

Jesper Hanson

University of Amsterdam; Dutch Ministry of Finance

Frank de Jong

Tilburg University

Multiple version iconThere are 2 versions of this paper

Date Written: May 8, 2017

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.

Keywords: public debt auctions, bid-to-cover ratios, primary and secondary markets, primary dealers, volatility

JEL Classification: G11, G12, G14, G18

Suggested Citation

Beetsma, Roel M. W. J. and Giuliodori, Massimo and Hanson, Jesper and de Jong, Frank, Bid-to-Cover and Yield Changes Around Public Debt Auctions in the Euro Area (May 8, 2017). ECB Working Paper No. 2056, Available at SSRN: https://ssrn.com/abstract=2968978 or http://dx.doi.org/10.2139/ssrn.2968978

Roel M. W. J. Beetsma (Contact Author)

University of Amsterdam - Research Institute in Economics & Econometrics (RESAM) ( email )

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Massimo Giuliodori

University of Amsterdam - Faculty of Economics & Econometrics (FEE) ( email )

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Tinbergen Institute ( email )

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Jesper Hanson

University of Amsterdam ( email )

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Amsterdam, 1018 WB
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Dutch Ministry of Finance ( email )

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Frank De Jong

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC Noord-Brabant 5000 LE
Netherlands

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