Liquidity in the Eurozone Treasury Bills Market

Antoine Renucci (), Bruno Biais and Gilles Saint-Paul
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Antoine Renucci: DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique
Bruno Biais: GREMAQ - Groupe de recherche en économie mathématique et quantitative - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique

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Abstract: We analyze empirically the determinants of Eurozone Treasury bills yields. Market microstructure as well as macroeconomic variables are found to significantly impact yields. Secondary trading in a centralized transparent electronic limit order book enhances liquidity and thus reduce yields. Irregularly issuing securities raises the yields government must pay. Consistent with the flight to quality hypothesis, yields are lower when the stock market is volatile. Consistent with the flight to liquidity hypothesis, yields are lower when the amount issued is large in such periods. Finally, yields are found to be greater when governments are more indebted.

Keywords: Liquidity; Market Microstructure; Volatility; Treasury bills; Treasury auctions; Yield spread; Eurozone; Liquidité; Microstructure; Volatilité; Bons du Trésor; Enchères; Fourchette de taux; Flight to quality; flight to liquidity; Zone Euro (search for similar items in EconPapers)
Date: 2007-10-16
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Published in CORE-LSMUniversité Catholique de Louvain, Oct 2007, Louvain-La-Neuve, Belgium

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00341755

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