Exploring the Performance of Government Debt Issuance

Beschreibung

The performance of governments in issuing debt is despite its importance for finance and welfare empirically an open question. Issuance timing in corporate finance and auction design have been studied extensively, yet skill of debt management offices (DMOs) in auctioning off national debt remains unexplored. We thus develop performance measures for the decisions the offices face: The amount to issue is largely exogenous to them, but they determine its distribution across issue dates (timing) and the choice of instruments (allocation).

For a unique dataset of five European DMOs, we apply the measures to assess whether DMOs' issuance strategies are optimized successfully with respect to prevailing market rates, their country's spread, or the mispricing between primary and secondary markets. While we find no ability to outperform the secondary market, Austria and Italy appear to time primary-market effects unfavorably: While they do not, on average, underprice issues severly, they allot more on dates of high underpricing, compared to other DMOs who avoid this. Thus, while government issues do not exhibit strong effects on the secondary market, DMOs are well advised to take primary-market effects into account.

Zeitraum	30 März 2011
Ereignistitel	Swiss Society for Financial Market Research
Veranstaltungstyp	Keine Angaben
Bekanntheitsgrad	International