How has sovereign bond market liquidity changed? An illiquidity spillover analysis

Arbeitspapier

Amid increasing regulation, structural changes of the market and Quantitative Easing as well as extremely low yields, concerns about the market liquidity of the Eurozone sovereign debt markets have been raised. We aim to quantify illiquidity risks, especially such related to liquidity dry-ups, and illiquidity spillover across maturities by examining the reaction to illiquidity shocks at high frequencies in two ways: a) the regular response to shocks using a variance decomposition and, b) the response to shocks in the extremes by detecting illiquidity shocks and modeling those as ultivariate Hawkes processes. We find that: a) market liquidity is more fragile and less predictable when an asset is very illiquid and, b) the response to shocks in the extremes is structurally different from the regular response. In 2015 long-term bonds are less liquid and the medium-term bonds are liquid, although we observe that in the extremes the medium-term bonds are increasingly driven by illiquidity spillover from the long-term titles.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: SAFE Working Paper ; No. 151

Klassifikation und Themen

• Klassifikation: Wirtschaft
• Thema: liquidity ; jump detection ; Hawkes processes ; government bonds ; MTS bond market ; Quantitative Easing

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Schneider, Michael ; Lillo, Fabrizio ; Pelizzon, Loriana
• Ereignis: Veröffentlichung
• (wer): Goethe University Frankfurt, SAFE - Sustainable Architecture for Finance in Europe
• (wo): Frankfurt a. M.
• (wann): 2016

Weitere Informationen

• DOI: doi:10.2139/ssrn.2853459
• Handle: http://hdl.handle.net/10419/147244
• URN: urn:nbn:de:hebis:30:3-417031
• Letzte Aktualisierung: 10.03.2025, 11:45 MEZ