Unconventional Monetary Policy and Auction Cycles of Eurozone Sovereign Debt
62 Pages Posted: 21 Nov 2019
Date Written: November 7, 2019
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
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