Unconventional Monetary Policy and Auction Cycles of Eurozone Sovereign Debt

62 Pages Posted: 21 Nov 2019

See all articles by Josha Van Spronsen

Josha Van Spronsen

University of Amsterdam

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

Multiple version iconThere are 2 versions of this paper

Date Written: November 7, 2019

Abstract

We provide evidence that the ECB’s unconventional monetary policy dampens yield cycles in secondary Eurozone sovereign debt markets around new sovereign debt auctions. This effect increases in market volatility. Cycles caused by domestic auctions and the role of market volatility are largest for countries with low credit ratings. Auctions by these countries 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: auction cycles, sovereign debt, asset purchase programs, primary market, secondary market, market volatility

JEL Classification: E43, G12, G18, G15

Suggested Citation

Van Spronsen, Josha and Beetsma, Roel M. W. J., Unconventional Monetary Policy and Auction Cycles of Eurozone Sovereign Debt (November 7, 2019). Amsterdam Centre for European Studies Research Paper No. 2019/08. Available at SSRN: https://ssrn.com/abstract=3490012 or http://dx.doi.org/10.2139/ssrn.3490012

Josha Van Spronsen (Contact Author)

University of Amsterdam ( email )

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Roel M. W. J. Beetsma

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

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European Commission ( email )

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Tinbergen Institute ( email )

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Netspar ( email )

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Tilburg, 5000 LE
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