Unconventional Monetary Policy and Auction Cycles of Eurozone Sovereign Debt

60 Pages Posted: 15 Nov 2019 Last revised: 2 Dec 2019

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

Josha Van Spronsen

University of Amsterdam

Multiple version iconThere are 2 versions of this paper

Date Written: November 2019

Abstract

We provide evidence that the ECB's unconventional monetary policy dampens yield cycles in secondary markets for Eurozone sovereign debt around new sovereign debt auctions. This dampening effect tends to be larger when market volatility is higher. Cycles caused by domestic auctions and the role of market volatility are largest for countries with low credit ratings. Auctions by these countries also generate highly-significant auction cycles in other countries. Auction cycles can have a non-negligible effect on debt-servicing costs, but these may be contained by concentrating debt issuance in tranquil periods and by coordinating auction calendars among countries, so as to maximize the dispersion of auction activity in time.

Keywords: asset purchase programs, auction cycles, market volatility, primary market, Secondary market, Sovereign debt

JEL Classification: E43, G12, G15, G18

Suggested Citation

Beetsma, Roel M. W. J. and Van Spronsen, Josha, Unconventional Monetary Policy and Auction Cycles of Eurozone Sovereign Debt (November 2019). CEPR Discussion Paper No. DP14099. Available at SSRN: https://ssrn.com/abstract=3486250

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

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

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European Commission ( email )

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Centre for Economic Policy Research (CEPR)

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CESifo (Center for Economic Studies and Ifo Institute)

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Tinbergen Institute ( email )

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Netspar ( email )

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Josha Van Spronsen

University of Amsterdam ( email )

Spui 21
Amsterdam, 1018 WB
Netherlands

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