Sovereign credit risk, liquidity, and European Central Bank intervention: Deus ex machina?

详细信息    查看全文

• 作者：Loriana Pelizzon ; ^a ; ^b ; ^{pelizzon@safe.uni-frankfurt.de" class="auth_mail" title="E-mail the corresponding author} ; Marti G. Subrahmanyam^c ; Davide Tomio^d ; Jun Uno^b ; ^e
• 关键词：Liquidity ; Credit risk ; Eurozone sovereign bonds ; Financial crisis ; MTS bond market
• 刊名：Journal of Financial Economics
• 出版年：2016
• 出版时间：October 2016
• 年：2016
• 卷：122
• 期：1
• 页码：86-115
• 全文大小：6286 K

文摘

We examine the dynamic relation between credit risk and liquidity in the Italian sovereign bond market during the eurozone crisis and the subsequent European Central Bank (ECB) interventions. Credit risk drives the liquidity of the market. A 10% change in the credit default swap (CDS) spread leads to a 13% change in the bid-ask spread, the relation being stronger when the CDS spread exceeds 500 basis points. The Long-Term Refinancing Operations of the ECB weakened the sensitivity of market makers’ liquidity provision to credit risk, highlighting the importance of funding liquidity measures as determinants of market liquidity.