欧洲央行主权债券市场失灵（英）2024

MarkKerssenfischer,CasparHelmus WorkingPaperSeries Outagesinsovereignbondmarkets No2944 Disclaimer:ThispapershouldnotbereportedasrepresentingtheviewsoftheEuropeanCentralBank(ECB).TheviewsexpressedarethoseoftheauthorsanddonotnecessarilyreflectthoseoftheECB. Abstract Weuseoutagesasnaturalexperimentstostudysovereignbondmarketfunctioning.Whentheeuroareafuturesmarketgoesdown,tradingactivityonthecashmarketdeclines,liquidityevaporates,andtransactionpricesdeviatefromfundamentalvalues.Tracingbackthismacro-levelmarketbreakdowntothemicro-level,weshowthatparticularlydealerswithdrawfromthecashmarketduringoutages.Whilemostoftheirremainingtradesremainfairlypriced,dealer’scapacitytointermediatetradesonthecashmarketisreduced,forcingmoreclientstotradedirectlywitheachother,leadingtosubstantialmispricing.Lastly,outagesoncashtradingvenuesbarelyaffectthefuturesmarket,suggestingthatpriceformationandliquidityprovisionisaone-waystreet,andoutagesontheUSandeuroareafuturesmarketbarelyaffecteachother,instarkcontrasttothesignificantpricespillovers.Ourresultsrevealthetrade-offsbetweena(de)centralizedmarketstructure,theysupportcross-assetlearningmodelstoexplainthelinkbetweenliquidityandarbitrage,andtheydemonstratehowfinancialintermediariescanimposeimportantlimitstoarbitrage. Keywords:Yieldcurve,marketmicrostructure,naturalexperiment. JELclassification:G12,G14,G23 Non-technicalsummary Sovereignbondmarketsareatthecoreofthefinancialsystem.Thispaperusesoutagesasnaturalexperimentstoimproveourunderstandingofhowthesemarketsfunction.Westudyseveraloutagesondifferenttradingvenuesaffectingdifferentfinancialinstruments.Alloftheseoutageswerecausedbyunanticipatedandexogenoustechnicalglitches.Hence,howthedifferenttradingvenues,instruments,andmarketparticipantsreactedtotheserareoutageeventsishighlyinformativeabouthowthesovereignbondmarketfunctionsinnormaltimes. Ourfirstkeyresultisthatthecashmarketforeuroareasovereignbondsvitallydependsonbondfutures.Bondfuturesobligethebuyertobuy(orthesellertosell)asovereignbondatapredeterminedpriceanddateinthefuture.WhenthesebondfuturesstoptradingduetoanoutageoftheEurexfuturesexchange,bondsonthecashmarkettradelessfrequently,theirliquidityevaporates,andtheirtransactionpricesdeviatefromtheirfundamentallyfairvalues. Thankstoournon-anonymoustransactiondataset,wecanpinpointthemicro-levelmech-anismsunderlyingthesemacro-levelresults.Thebehavioroffinancialintermediaries,mostimportantlydealers,turnsouttobecrucial.Thesedealersaremostlylargebanksparticipatingintheauctionsofnewsovereignbonds.TheyreducetheircashmarketpresencethemostduringEurexoutages.Iftheydotrade,theytradeatfundamentallyfairprices,buttheylargelystoptotakeoninventoryrisktointermediatetradesbetweenclients,suchasinvestmentfunds,insur-ancecompaniesornon-financialcorporations.Hence,clientstradedirectlywitheachother,andpreciselytheseclient-to-clienttradesoftenoccuratpricesfarfromfundamentallyfairvalues. ThedichotomybetweendealersandclientsalsoexplainsanumberofotherphenomenaweobserveonthecashmarketduringEurexoutages.Forinstance,tradingvolumesandmarketliquiditydropmore–butpricingerrorsincreaseless–forbondsoflongermaturity,wheredealersarecomparativelymoreactive.Similarly,smalltransactionsbecomemostmispriced,astheseareusuallyexecutedbetweenclients.Takentogether,ourmicro-levelevidenceshowsthatdealershaveaninformationaladvantageoverclients,inthesensethatdealersproperlypricerisk-freesovereignbondsevenwithoutbondfutures.Atthesametime,dealersimposeimportantlimitstoarbitrage,sincetheyrelyheavilyonthefuturesmarketforhedgingpurposes.Ineffect,theEurexoutageactsasanexogenousshockreducingtheirintermediationcapacity.Unabletohedgeanyadditionalinventoryrisk,dealersretractfromthecashmarket,whereclientspushmarketpricesawayfromfundamentalvalues. Wealsolookattheotherdirectionandstudyoutagesonfourdifferentbondtradingplatformsonthecash–ratherthanfuture–market.Wefindthattheseoutageshaverathersmalleffects,notonlywithinthecashmarket,butalsoonthefuturesmarket.Thissuggeststhatpriceformationandliquidityprovisionismoreofaone-waystreetfromthefuturestothecashmarket.Lastly,westudytransatlanticspillovers.WefindlittleevidencethatoutagesonEurexaffectthemarketfunctioningonCME,themainUSfuturesexchange.Evenmoresurprisingly,wealsofindnoeffectintheotherdirection.WhereasalargeliteraturedocumentsstrongpricespilloversfromtheUStoEurope,wefindvirtuallynoliquidityspillovers. 1Introduction Therisk-freeyieldcurvebuildsthefoundationofallassetpricingandtheliteraturehasmadeconsiderableprogressunderstandingwhybondyieldschange.1Thispaperprovidesnewevidenceonhowpriceformationtakesplace,byexploitingmarketoutagesasnaturalexperiments.Theseoutageswereunanticipatedandforallintentsandpurposesexogenous.Hence,howthedifferenttradingvenues,financialinstruments,andinvestortypesreactedtotheseoutagesprovidesarareglimpseintothepriceformationprocessunderlyingtherisk-freeyieldcurve. Ourfirstkeycontributionistohighlighttheroleofbondfutures.Wefocusontwodaysin2020,14Apriland1July,whentechnicalglitchescausedtradingontheeuroareafu-turesexchange