Liquidity in the euro-area sovereign bond market during the “dash for cash” driven by the COVID-19 crisis

Vassilios Papavassilioua and Fan Xiab
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Vassilios Papavassilioua: University College Dublin and UCD Geary Institute for Public Policy
Fan Xiab: Bank for International Settlements (BIS)
Authors registered in the RePEc Author Service: Vassilios G. Papavassiliou

No 202406, Working Papers from Geary Institute, University College Dublin

Abstract: We study the liquidity of the euro-area sovereign bond market during the March 2020 dash for cash. We provide evidence that liquidity was signif- icantly impaired across the three core euro-area countries. We note that the liquidity deterioration was not as severe as that during the euro-area sovereign debt crisis. Spikes in illiquidity are reversed in the period imme- diately following the dash for cash episode. We also document strong com- monalities in liquidity that are reduced after the dash for cash. This result indicates that variation in liquidity exhibits a strong common component highlighting the systemic risk that comes as a result.

Keywords: Liquidity; Sovereign bond markets; COVID-19 outbreak; Common factors (search for similar items in EconPapers)
JEL-codes: C5 G01 G10 G15 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2024
New Economics Papers: this item is included in nep-ban and nep-eec
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Related works:
Journal Article: Liquidity in the euro area sovereign bond market during the “dash for cash” driven by the COVID-19 crisis (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:ucd:wpaper:202406

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