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Determinants of the bid-to-cover ratio in Eurozone sovereign debt auctions

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  • Beetsma, Roel
  • Giuliodori, Massimo
  • Hanson, Jesper
  • de Jong, Frank

Abstract

Building on a unique dataset of Eurozone sovereign debt auctions, this paper analyzes the determinants of their bid-to-cover ratios, which is the most common measure of the outcome of an auction. We find that the secondary market yield on the same maturity instrument, past domestic and foreign bid-to-cover ratios and occasionally the number of primary dealers tend to exert a positive effect on the current bid-to-cover ratio, while the opposite is the case for the supply and the volatility of the yield. The results thus suggest that past information helps to predict the demand in auctions.

Suggested Citation

  • Beetsma, Roel & Giuliodori, Massimo & Hanson, Jesper & de Jong, Frank, 2020. "Determinants of the bid-to-cover ratio in Eurozone sovereign debt auctions," Journal of Empirical Finance, Elsevier, vol. 58(C), pages 96-120.
    • Handle: RePEc:eee:empfin:v:58:y:2020:i:c:p:96-120
    DOI: 10.1016/j.jempfin.2020.05.005
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    3. Irfan Cercil & Cem Ali Gokcen & Sule Senel Tabak, 2024. "Insights into Auction Dynamics: Exploring Drivers of Market Demand in Turkish Government Domestic Bond Auctions," CBT Research Notes in Economics 2409, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.

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    More about this item

    Keywords

    Eurozone public debt auctions; Bid-to-cover; Maturity; Demand; Supply; Yield; Volatility;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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