The Microstructure of the European Sovereign Bond Market: A Study of the Euro-zone Crisis

Loriana Pelizzon, Marti G. Subrahmanyam, Davide Tomio, Jun Uno

Publikation: KonferencebidragPaperForskningpeer review

Abstrakt

We explore the interaction between credit risk and liquidity, during the Euro-zone crisis, in the Italian sovereign bond market, using a unique tick-by-tick dataset, from the period June 2011-December 2012. We document a strong, dynamic relationship between changes in sovereign credit risk and
market liquidity, conditional on the credit default swap (CDS) spread: When the CDS is above 500 basis points (bp), market liquidity adjusts more rapidly and signicantly to changes in the credit risk. Other global systemic factors also aect market liquidity, while, surprisingly, the specic credit risk of primary dealers plays only a modest role, especially under conditions of stress. Further, the
Long-Term Renancing Operations (LTRO) by the European Central Bank (ECB) on December 8, 2012, clearly attenuated the relationship between credit risk and liquidity.
OriginalsprogEngelsk
Publikationsdato2014
Antal sider62
StatusUdgivet - 2014
BegivenhedThe 74th Annual Meeting of American Finance Association. AFA 2014 - Loews Philadelphia Hotel, Philadelphia, USA
Varighed: 3 jan. 20145 jan. 2014
Konferencens nummer: 74
http://www.afajof.org/details/page/5310071/2014-Meeting-Program.html

Konference

KonferenceThe 74th Annual Meeting of American Finance Association. AFA 2014
Nummer74
LokationLoews Philadelphia Hotel
LandUSA
ByPhiladelphia
Periode03/01/201405/01/2014
Internetadresse

Emneord

  • Liquidity
  • Government bonds
  • Financial crisis
  • MTS bond market

Citationsformater