TY - JOUR
T1 - Expected issuance fees and market liquidity
AU - Buis, Boyd
AU - Pieterse-Bloem, M.
AU - Verschoor, W.F.C.
AU - Zwinkels, Remco
PY - 2020/3
Y1 - 2020/3
N2 - We examine the interaction between the primary and secondary markets for euro area sovereign bonds. Primary dealers compete to be selected as lead manager in the primary market, and have an incentive to increase liquidity. For our 2008–2012 sample of sovereign bonds from 11 euro area countries, we find that expected issuance fees are positively and economically related to market liquidity. The fee-driven liquidity effect is especially strong for countries with high funding needs, in periods of high re-financing uncertainty, and for low-risk bonds.
AB - We examine the interaction between the primary and secondary markets for euro area sovereign bonds. Primary dealers compete to be selected as lead manager in the primary market, and have an incentive to increase liquidity. For our 2008–2012 sample of sovereign bonds from 11 euro area countries, we find that expected issuance fees are positively and economically related to market liquidity. The fee-driven liquidity effect is especially strong for countries with high funding needs, in periods of high re-financing uncertainty, and for low-risk bonds.
KW - Issuance fee
KW - Market liquidity
KW - Market microstructure
KW - Sovereign bonds
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U2 - 10.1016/j.finmar.2019.100514
DO - 10.1016/j.finmar.2019.100514
M3 - Article
SN - 1386-4181
VL - 48
SP - 1
EP - 20
JO - Journal of Financial Markets
JF - Journal of Financial Markets
M1 - 100514
ER -