DescriptionThe 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, Germany appears to time primary market effects favorably: Although it cannot, on average, overprice issues, it allots more on dates of low underpricing, compared to other DMOs. Thus, while government issues do not exhibit strong effects on the secondary market, DMOs are well advised to take primary market effects into account.
|Period||8 Oct 2010 → 9 Oct 2010|
|Event title||17th Meeting of the German Finance Association (DGF)|
|Degree of Recognition||International|