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Discussion Paper Details

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Title: Bid-to-cover and yield changes around public debt auctions in the euro area

Author(s): Roel Beetsma, Frank de Jong, Massimo Giuliodori and Jesper Hanson

Publication Date: March 2017

Keyword(s): bid-to-cover ratios, primary and secondary markets, primary dealers, public debt auctions and volatility

Programme Area(s): Financial Economics

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.

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Bibliographic Reference

Beetsma, R, de Jong, F, Giuliodori, M and Hanson, J. 2017. 'Bid-to-cover and yield changes around public debt auctions in the euro area'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=11932