Sovereign Eurobond Liquidity and Yields

May 20, 2022

Preview Citation

Format: Chicago

Daniel C Hardy. Sovereign Eurobond Liquidity and Yields, (USA: International Monetary Fund, 2022) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Market liquidity is of value to both investors and issuers of securities, and is therefore a crucial factor in asset pricing. For the important asset class of Eurobonds, significant feedback from liquidity to pricing is established, and it is shown that bid-ask spreads (a proxy for market liquidity) and yields are closely related to bond characteristics such as issue volume, time to maturity, the inclusion of collective action clauses, and the jurisdiction of issuance. Debt management offices can choose these characteristics in a way that has economically significant and persistent effects on both liquidity and pricing.

Subject: Asset and liability management, Bond yields, Bonds, Collective action clauses, Credit ratings, Financial institutions, Liquidity, Money

Keywords: Bid-ask spread, Bond yields, Bonds, Collective action clauses, Credit ratings, Debt management, Debt management office, Eurobond liquidity, Eurobond yields, Global, Instrument design, Liquidity, Log yield determinant, Market liquidity, Summary statistics

Publication Details

Pages:

71
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2022/098
Stock No:

WPIEA2022098
ISBN:

9798400211430
ISSN:

1018-5941

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