Fiscal Limits and the Pricing of Eurobonds

• 成果类型: Article
• 署名作者: Pallara, Kevin; Renne, Jean-Paul
• 署名单位: European Central Bank; Bank of Italy; University of Lausanne
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2023.4740
• 发表日期: 2024
• 关键词: Sovereign credit risk; Eurobonds; public debt management; Joint liability; term structure of interest rates

摘要

This paper proposes a methodology to price bonds jointly issued by a group of countries-Eurobonds in the euro-area context. We consider two types of bonds; the first is backed by several and joint guarantees (SJGs), and the second features several but not joint guarantees (SNJGs). The pricing of SJG and SNJG bonds reflects different assumptions regarding the pooling of debtors' fiscal resources. We estimate fiscal limits for the six largest euro-area economies over 2008-2021 and deduce counterfactual Eurobond prices. For the five-year maturity, SNJG bond yield spreads would have been about three times larger than SJG ones over the estimation sample. Hence, issuing SJG bonds could result in gains at the aggregate level. Notwithstanding, our model also predicts that gains may temporarily vanish in periods of acute fiscal stress. We finally envision postissuance redistribution schemes, whereby gains stemming from the issuance of SJG bonds could be shared among participating countries; we argue that these schemes may alleviate the reduction in market discipline resulting from common bonds issuance.