The Maturity of Sovereign Debt Issuance in the Euro Area

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

No 13729, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We use information on new sovereign debt issues in the euro area to explore the drivers behind the debt maturity decisions of governments. We set up a theoretical model for the maturity structure that trades off the preference for liquidity services provided by short-term debt, roll-over risk and price risk. The average debt maturity is negatively related to both the level and the slope of the yield curve. A panel VAR analysis shows that positive shocks to risk aversion, the probability of non-repayment and the demand for the liquidity services of short-term debt all have a positive effect on the yield curve level and slope, and a negative effect on the average maturity of new debt issues. These results are partially in line with our theory. A forecast error variance decomposition suggests that changes in the probability of non-repayment as captured by the expected default frequency extracted from credit default spreads are the most important source of shocks.

Keywords: Maturity; Euro-area public debt auctions; Yield curve; Liquidity services of short debt; Risk aversion; Expected repayment probability (search for similar items in EconPapers)
JEL-codes: E62 G11 G12 G18 (search for similar items in EconPapers)
Date: 2019-05
New Economics Papers: this item is included in nep-bec, nep-eec, nep-mac and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://cepr.org/publications/DP13729 (application/pdf)

Related works:
Journal Article: The maturity of sovereign debt issuance in the euro area (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:13729

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP13729

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().