The European bond markets under EMU


Pagano, Marco ; Thadden, Ernst-Ludwig von



URL: https://ideas.repec.org/p/cpr/ceprdp/4779.html
Additional URL: https://cepr.org/active/publications/discussion_pa...
Document Type: Working paper
Year of publication: 2004
The title of a journal, publication series: CEPR Discussion Paper
Volume: 4779
Place of publication: London
Publishing house: Centre for Economic Policy Research (CEPR)
Publication language: English
Institution: School of Law and Economics > VWL, Mikroökonomische Theorie (von Thadden)
Subject: 330 Economics
Abstract: In this paper, we document how in the wake of monetary unification the markets for Euro-area sovereign and private-sector bonds have become increasingly integrated. Issuers and investors alike have come to regard the Euro-area bond market as a single one. Primary and secondary bond markets have become increasingly integrated on a pan-European scale. Issuance of corporate bonds has taken off on an unprecedented scale in continental Europe. In the process, both investors and issuers have reaped the considerable benefits afforded by greater competition in the underwriting of private bonds and auctioning of public ones, and by the greater liquidity of secondary markets. Bond yields have converged dramatically in the transition to EMU. The persistence of small and variable yield differentials for sovereign debt under EMU indicates that Euro-area bonds are still not perfect substitutes. However, to a large extent this does not reflect persistent market segmentation but rather small differentials in fundamental risk. Liquidity differences play at most a minor role, and this role appears to arise partly from their interaction with fundamental risk. The challenges still lying ahead are numerous. They include the unbalance between the German-dominated futures and the underlying cash market; the vulnerability of the cash markets' prices to free-riding and manipulation by large financial institutions; the possibility of joint bond issuance by Euro-area countries; the integration of clearing and settlement systems in the Euro-area bond market, and the participation of new accession countries' issuers to this market.

Dieser Eintrag ist Teil der Universitätsbibliographie.




+ Citation Example and Export

Pagano, Marco ; Thadden, Ernst-Ludwig von (2004) The European bond markets under EMU. CEPR Discussion Paper London 4779 [Working paper]


+ Search Authors in

+ Page Views

Hits per month over past year

Detailed information



You have found an error? Please let us know about your desired correction here: E-Mail


Actions (login required)

Show item Show item