Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/244262 
Authors: 
Year of Publication: 
2020
Series/Report no.: 
ESRB Working Paper Series No. 110
Publisher: 
European Systemic Risk Board (ESRB), European System of Financial Supervision, Frankfurt a. M.
Abstract: 
Do governments strategically choose debt maturity to fill supply gaps across maturities? Building on a new panel data set of more than 9,000 individual Eurozone government debt issues between 1999 and 2015, I find that governments increase long-term debt issues following periods of low aggregate Eurozone long-term debt issuance, and vice versa. This gap-filling behavior is more pronounced for (1) less financially constrained and (2) higher rated governments. Using the ECB's three-year LTRO in 2011-2012 as an event study, I find that core governments filled the supply gap of longer maturity debt, which resulted from peripheral governments accommodating banks' short-term debt demand for "carry trades". This gap-filling implies that governments act as macro-liquidity providers across maturities, thereby adding significant risk absorption capacity to government bond markets.
Subjects: 
Financial Stability
Government Bond Market
Liquidity Provision
Market Segmentation
JEL: 
E58
E62
G11
H63
Persistent Identifier of the first edition: 
ISBN: 
978-92-9472-172-3
Document Type: 
Working Paper

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