Gap-filling government debt maturity choice

Arbeitspapier

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.

Object Details

• ISBN: 978-92-9472-172-3
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ESRB Working Paper Series ; No. 110

Classification and Topics

• Classification: Wirtschaft ; Central Banks and Their Policies ; Fiscal Policy ; Portfolio Choice; Investment Decisions ; National Debt; Debt Management; Sovereign Debt
• Subject: Financial Stability ; Government Bond Market ; Liquidity Provision ; Market Segmentation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Eidam, Frederik
• Event: Veröffentlichung
• (who): European Systemic Risk Board (ESRB), European System of Financial Supervision
• (where): Frankfurt a. M.
• (when): 2020

Further information

• DOI: doi:10.2849/116341
• Handle: http://hdl.handle.net/10419/244262
• Last update: 10.03.2025, 11:41 AM CET