- Author
- Jurksas Linas (Vilnius University, Vilnius, Lithuania)
- Title
- What Factors Shape the Liquidity Levels of Euro Area Sovereign Bonds?
- Source
- Open Economics, 2018, vol. 1, iss. 1, s. 154-166, wykr.,tab., bibliogr. 28 poz.
- Keyword
- Obligacje skarbowe, Rentowność obligacji, Płynność finansowa
Treasury bond, Bond yield, Financial liquidity - Note
- JEL Classification: C21, G12, G14, G21.
summ. - Abstract
- The purpose of this paper is to determine the factors that shape the liquidity levels of euro area sovereign bonds. The values of liquidity measure and explanatory variables were calculated from the limitorder book dataset for almost five hundred bonds from six largest euro area sovereign bond markets. he created variables were used in a cross-sectional regression model. The results revealed that haracteristics of sovereign bonds are indeed highly linked with bond liquidity levels, and these effects become even stronger during the regimes of lower market liquidity. Contrary to the statements of market participants and findings of many other studies, the magnitude of trading automation and obligatory requirements imposed on dealers were found to be negatively linked with the liquidity level of sovereign bonds.(original abstract)
- Full text
- Show
- Bibliography
- Ai, C., You, J., Zhou, Y. (2014). Estimation of fixed effects panel data partially linear additive regression models. The Econometrics Journal, 17(1), 83-106. https://doi.org/10.1111/ectj.12011.
- Amihud, Y. (2002). Illiquidity and Stock Returns, Cross-section and Time-series Effects. Journal of Financial Markets, 5, 31-56. https://doi.org/10.1017/cbo9780511844393.010.
- Bank for International Settlements. (2016). Electronic trading in fixed income markets. Report of Bank for International Settlements, 1-44.
- Cameron, A. C., Miller, D. L. (2015). A Practitioner's Guide to Cluster-Robust Inference. Journal of Human Resources, 50(2), 317-372. https://doi.org/10.3368/jhr.50.2.317.
- Darbha, M., Dufour, A. (2015). Euro Area Government Bond Market Liquidity. SSRN Electronic Journal, 1-45. https://doi. org/10.2139/ssrn.2470944.
- Diaz, A., Escribano, A. (2017). Liquidity measures throughout the lifetime of the U.S. Treasury bond. Journal of Financial Markets, 33, 42-74. https://doi.org/10.1016/j.finmar.2017.01.002.
- Dunne, P. G., Moore, M. J., Portes, R. (2006). European Government Bond Markets, Transparency, Liquidity, Efficiency. City of London Corporation Monograph commissioned from CEPR.
- Engle, R., Fleming, M., Ghysels, E., Nguyen, G. (2011). Liquidity, Volatility, and Flights to Safety in the U.S. Treasury Market, Evidence from a New Class of Dynamic Order Book Models. Federal Reserve Bank of New York Staff Reports, 590, 1-55. https://doi.org/10.2139/ssrn.2195655.
- European Central Bank. (2017). Debt Securities Statistics. Available from Internet: ttps://www.ecb.europa.eu/stats/ financial_markets_and_interest_rates/securities_issues/debt_securities/.
- European Parliament and Council. (2014). Directive on markets in financial instruments. Available from Internet: http://eur-lex. europa.eu/legalcontent/ EN/TXT/HTML/?uri=CELEX,32014L0065
- European Systemic Risk Board. (2018). Sovereign bond-backed securities, a feasibility study. Report by the ESRB High-Level Task Force on Safe Assets, 1,51. https://doi.org/10.2849/262403.
- Fleming, M. J. (2003). Measuring Treasury Market Liquidity. Economic Policy Review, 9(3), 1-57. https://doi.org/10.2139/ ssrn.276289.
- Galliani, C., Petrella, G., Resti, A. (2014). The liquidity of corporate and government bonds: drivers and sensitivity to different market conditions. Joint Research Centre Technical Reports, 1,38. https://doi.org/10.2788/70146.
- Goldberg, R. S., Ronn, E. I. (2018). Intra-Market Correlations in the Bond Markets, Extending Empirical Regularities from the Equity Markets. The Journal of Fixed Income, 27(3), 23-36. https://doi.org/10.3905/jfi.2018.27.3.023.
- Goyenko, R., Subrahmanyam, A., Ukhov, A. (2011). The Term Structure of Bond Market Liquidity and Its Implications for Expected Bond Returns. Journal of Financial and Quantitative Analysis, 46(1), 111-139. https://doi.org/10.1017/S0022109010000700.
- Holden, C. W., Jacobsen, S., Subrahmanyam, A. (2014). The Empirical Analysis of Liquidity. Foundations and Trends in Finance, 8(4), 263-365. https://doi.org/10.2139/ssrn.2402215.
- Jurkšas, L., Kapp, D., Nyholm, K., Von Landesberger, J. (2018). Euro area sovereign bond market liquidity since the start of the PSPP. ECB Economic Bulletin, 2018(2), 41-44.
- International Monetary Fund. (2013). A New Look at the Role of Sovereign Credit Default Swaps. Global Financial Stability Report, 57-92.
- International Monetary Fund. (2015). Market Liquidity-Resilient or Fleeting? Global Financial Stability Report, 49-81.
- ISDA. (2014). Adverse Liquidity Effects of the EU Uncovered Sovereign CDS Ban. Research Note, 1-12.
- Mercato dei Titoli di Stato. (2017). MTS Markets Overview. Presentation at World Bank. Available from Internet: http:// pubdocs.worldbank.org/en/265741493316237603/Angelo-Proni-WB-Apr-2017.pdf.
- Pellizon, L., Subrahmanyam, M. G., Tomio, D., Uno, J. (2013). The Microstructure of the European Sovereign Bond Market, A Study of the Euro-zone Crisis. SSRN Electronic Journal, 1-51. https://doi.org/10.2139/ssrn.2242918.
- Roll, R. (1984). A Simple Implicit Measure of the Effective Bid-Ask Spread in an Efficient Market. The Journal of Finance, 39(4), 1127-1139. https://doi.org/10.2307/2327617.
- Schneider, M., Lillo, F., Pellizon, L. (2016). Modelling illiquidity spillovers with Hawkes processes, an application to the sovereign bond market. Quantitative Finance, 18(2), 283-293. https://doi.org/10.1080/14697688.2017.1403155.
- Slimane, M. B., De Jong, M. (2017). Bond Liquidity Scores. The Journal of Fixed Income, 27(1), 77-82. https://doi.org/10.3905/ jfi.2017.27.1.077.
- Tibshirani, R. (1996). Regression Shrinkage and Selection via the Lasso. Journal of the Royal Statistical Society, 58(1), 267-288. https://doi.org/10.1111/j.1467-9868.2011.00771.x.
- Tsuchida, N., Watanabe, T., Yoshiba, T. (2016). The Intraday Market Liquidity of Japanese Government Bond Futures. Institute For Monetary and Economic Studies Discussion Paper Series, E7, 1-40.
- Vassallo, J. M., Rangel, T., Baeza, M. A., Bueno, P. C. (2018). The Europe 2020 Project: Bond Initiative, an Alternative to Finance Infrastructure in Europe. Technological and Economic Development of Economy, 24(1), 229-252. https://doi.org/10.3846/ 20294913.2016.1209251.
- Cited by
- ISSN
- 2451-3458
- Language
- eng
- URI / DOI
- https://doi.org/10.1515/openec-2018-0009