Expected issuance fees and market liquidity

Boyd Buis, M. Pieterse-Bloem, W.F.C. Verschoor, Remco Zwinkels

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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.

Original languageEnglish
Article number100514
Pages (from-to)1-20
Number of pages20
JournalJournal of Financial Markets
Early online date16 Oct 2019
Publication statusPublished - Mar 2020


  • Issuance fee
  • Market liquidity
  • Market microstructure
  • Sovereign bonds


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