Gap-Filling Government Debt Maturity Choice

66 Pages Posted: 5 Nov 2020 Last revised: 18 Nov 2021

See all articles by Frederik Eidam

Frederik Eidam

ZEW – Leibniz Centre for European Economic Research

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Date Written: September, 2020


Do governments strategically choose debt maturity to fill supply gaps across maturities? Building on a new panel data set of more than 9,000 individual Eurozone government debt issues between 1999 and 2015, I find that governments increase long-term debt issues following periods of low aggregate Eurozone long-term debt issuance, and vice versa. This gap-filling behaviour is more pronounced for (1) less financially constrained and (2) higher rated governments. Using the ECB’s three-year LTRO in 2011-2012 as an event study, I find that core governments filled the supply gap of longer maturity debt, which resulted from peripheral governments accommodating banks’ short-term debt demand for “carry trades”. This gap-filling implies that governments act as macro-liquidity providers across maturities, thereby adding significant risk absorption capacity to government bond markets.

JEL Classification: E58, E62, G11, H63

Suggested Citation

Eidam, Frederik, Gap-Filling Government Debt Maturity Choice (September, 2020). ESRB: Working Paper Series 2020/110, Available at SSRN: or

Frederik Eidam (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

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