Gilt auctions and secondary market dynamics

Demand Shocks for Public Debt in the Eurozone

“…The contemporaneous response of the yield curve is strong and statistically significant in both countries. In the case of Germany (Panel A) the results seem to be supportive of the prediction of the theoretical model and consistent with the findings of Gorodnichenko and Ray (2017) and Fuhrer and Giese (2019). Under the regime of no stress (or lower risk aversion), the responses are flatter than under the regime of high stress (or higher risk aversion).…”

“…Dobrev (2019) documents a demand shift from longer to shorter-duration Treasuries after the crisis. Another recent study is Fuhrer and Giese (2019). They identify demand shocks for UK Treasury bonds as deviations of the bid-to-cover ratio from its long-term mean.…”

“…The bid-to-cover ratio is one of the measures investors and the press follow the closest to assess demand conditions and the overall success of a given auction. Hence, it would seem natural to use it to directly quantify demand shocks, as done in Klingler and Sundaseran (2019) and Fuhrer and Giese (2019). There are, however, some issues that make the headline bid-to-cover ratio problematic to identify unexpected changes in the demand for Treasuries.…”

Demand Shocks for Public Debt in the Eurozone

“…The bid-to-cover ratio is the total amount of bids submitted by participants divided by the allotted volume. This measure has been used by Klingler and Sundaresan (2020), Dobrev (2019), andFuhrer andGiese (2021). There are, however, some issues that make the headline bid-to-cover ratio problematic to identify unexpected changes in the demand for Treasuries.…”

“…Some recent papers look at auction results to identify changes in the demand for Treasuries. Klingler and Sundaresan (2020) analyze the liquidity premium and “safe‐haven” status of Treasuries, Dobrev (2019) investigates how demand for U.S. Treasuries has changed in recent years, and Fuhrer and Giese (2021) study how demand shifts transmit across the yield curve in the United Kingdom. Gorodnichenko and Ray (2017) identify demand shocks by looking at high‐frequency price changes around U.S. auctions and analyze the effects on the yield curve and transmission into other markets.…”