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

• 成果类型: Article
• 署名作者: Pelizzon, Loriana; Subrahmanyam, Marti G.; Tomio, Davide; Uno, Jun
• 署名单位: Goethe University Frankfurt; Universita Ca Foscari Venezia; New York University; Copenhagen Business School; Waseda University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2016.06.001
• 发表日期: 2016
• 页码: 86-115
• 关键词: liquidity; Credit risk; Eurozone sovereign bonds; Financial crisis; MTS bond market

摘要

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. (C) 2016 Published by Elsevier B.V.