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The Impact of COVID-19 on Italian Sovereign Bond Market Quality

Author

Listed:
  • Gerardo Ferrara

    (Bank of England)

  • Maria Flora

    (Capital Fund Management and University of Verona)

  • Roberto Renò

    (ESSEC Business School)

Abstract

We study the market quality of Italian sovereign bonds during the COVID-19 pandemic, revealing its direct impact (represented by COVID-19 hospitalizations) and its indirect impact (channeled by the ECB monetary policy) on heightened volatility and deteriorated liquidity conditions during the first COVID-19 wave. We also uncover an additional channel by which the pandemic was costly for taxpayers: the surge of the auction premium. Our analysis shows that subsequent monetary policy measures effectively reduced volatility and the size of the premium during the second wave of the pandemic.

Suggested Citation

  • Gerardo Ferrara & Maria Flora & Roberto Renò, 2025. "The Impact of COVID-19 on Italian Sovereign Bond Market Quality," Journal of Financial Services Research, Springer;Western Finance Association, vol. 67(1), pages 55-71, April.
    • Handle: RePEc:kap:jfsres:v:67:y:2025:i:1:d:10.1007_s10693-024-00437-7
    DOI: 10.1007/s10693-024-00437-7
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    More about this item

    Keywords

    Auction premium; COVID-19; Monetary policy; Bond markets;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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