Discussion paper

DP11932 Bid-to-cover and yield changes around public debt auctions in the euro area

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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Citation

Beetsma, R, M Giuliodori, J Hanson and F de Jong (eds) (2017), “DP11932 Bid-to-cover and yield changes around public debt auctions in the euro area”, CEPR Press Discussion Paper No. 11932. https://cepr.org/publications/dp11932