Journal of Banking & Finance Vol. 87 2018
Bid-to-cover and yield changes around public debt auctions in the euro area
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.
- DOI
- 10.1016/j.jbankfin.2017.10.006
- Volume
- 87
- Pages
- 118-134
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib