Sovereign Eurobond Liquidity and Yields

Author/Editor:

Daniel C Hardy

Publication Date:

May 20, 2022

Electronic Access:

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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.

Series:

Working Paper No. 2022/098

Frequency:

regular

English

Publication Date:

May 20, 2022

ISBN/ISSN:

9798400211430/1018-5941

Stock No:

WPIEA2022098

Pages:

71

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