The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.


All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Banking

Can the EU solve the government debt puzzle?

Europe’s government bond auctions are a classic example of market failure. The department of Charlie McCreevy, the EU’s markets commissioner, knows this but can do nothing until it receives an official complaint. If banks are subsidizing the auction process to the tune of €600 million a year, as some claim, why don’t they make the call to Brussels?

The Dutch stay in touch


Why the European government bond markets have failed...and what the European Union would like to do about it

Europe’s primary sovereign debt markets have suffered market failure for many years. But is there anything the EU and its commissioner for internal markets and services, Charlie McCreevy, can do about it? Alex Chambers reports on how sovereign debt managers have coerced primary dealers into subsidizing Europe’s government debt markets by as much as €600 million a year.


cover-main.gif

European sovereign bond auctions do not work. A lack of price transparency makes participation at auction hazardous for all but the most savvy of operators. Most investors will not even consider using auctions to access the markets.

That doesn’t mean the auctions are failing. Far from it: most public sales of bonds are comfortably covered. In fact bonds sold at auction sell at a premium, and that is a large part of the problem. Around auction time, end investors run for the hills as only primary dealers have an incentive to buy these expensive bonds. This is a real contrast to the US, where investors are participants at auctions.



You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree