Academic Research

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Year Published: 2022

Author(s): Harald Kinateder, Vassilios G. Papavassiliou

Abstract: We investigate information shares in the price discovery process in the euro- area sovereign bond market across the yield curve, during both calm and crisis periods. We employ a rich high-frequency dataset from the MTS platform. We find that price discovery is enhanced, on average, especially for periph- ery countries during the European sovereign debt crisis however, increases in information shares are not uniform across the yield curve. We further show that no particular market leads the price formation process across all maturity segments. We find a clear improvement in market quality for core countries (Germany and the Netherlands) but mixed results for periphery countries (Italy and Spain) in the crisis period.

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Year Published: 2021

Author(s): Conall O'Sullivan, Vassilios G. Papavassiliou

Abstract: Using high-frequency data from the MTS trading platform, we examine return and volatility spillover effects across different maturities in the European sovereign bond market over tranquil and crisis periods. The longer-term benchmark securities of core countries are the largest net volatility transmitters, whereas the shorter-term bench- marks of periphery countries are the leading net receivers of volatility shocks. Moreover, the short-end and the long-end of the yield curve in both regions emerge as the sole net recipients of return spillovers. We note that bonds of periphery countries become volatility spillover transmitters during important macroeconomic events such as credit rating downgrades and financial assistance packages to financially distressed countries.

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Year Published: 2019

Author(s): Harald Kinateder, Vassilios G. Papavassiliou

Abstract: This paper analyzes whether realized higher moments are able to predict out-of-sample sovereign bond returns using high-frequency data from the European bond market. We study bond return predictability over tranquil and crisis periods and across core and periphery markets at the index and country level. We provide fresh evidence that realized kurtosis is the dominant predictor of subsequent returns among higher moments and other predictors such as CDS spreads, short-term interest rates and implied stock market volatility. Our findings further underline that sovereign bond return predictability is stronger during crisis periods and more pronounced for bonds of lower credit ratings.

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Year Published: 2016

Author(s): Michael Schneider, Fabrizio Lillo, Loriana Pelizzon

Abstract: 

Amid increasing regulation, structural changes of the market and Quantitative Easing as well as extremely low yields, concerns about the market liquidity of the Eurozone sovereign debt markets have been raised. We aim to quantify illiquidity risks, especially such related to liquidity dry-ups, and illiquidity spillover across maturities by examining the reaction to illiquidity shocks at high frequencies in two ways:

a) the regular response to shocks using a variance decomposition and

b) the response to shocks in the extremes by detecting illiquidity shocks and modeling those as multivariate Hawkes processes

We find that:

a) market liquidity is more fragile and less predictable when an asset is very illiquid and,

b) the response to shocks in the extremes is structurally different from the regular response. In 2015 long-term bonds are less liquid and the medium-term bonds are liquid, although we observe that in the extremes the medium-term bonds are increasingly driven by illiquidity spillover from the long-term titles.