Investor Activity in EFSF/ESM secondary bond markets

Title: Investor Activity in EFSF/ESM secondary bond markets

Download PDF: Working Paper 62

This paper discusses investor and dealer behaviour in the secondary markets of EFSF and ESM bonds between 2014 and 2020.

Authors: Martin Hillebrand (XU Exponential University of Applied Sciences), Marko Mravlak (ESM), Lorenz Breitsamter (Karlsruhe Institute of Technology) and Peter Schwendner (Zurich University of Applied Sciences)

Abstract:

This study discusses investor and dealer behaviour in the secondary market bond trade data of the EFSF and ESM, two of the largest supranational bond issuers in the euro area in the last decade. The underlying data are reported trades from the ESM primary dealers between 2014 and 2020 and comprise most of the global trading in EFSF and ESM bonds. 

We discuss stylised facts and trends related to investor and dealer behaviour. We illustrate the trends of increasing fund manager activity and digitalisation, and how turnover increased in the market segment of long maturities as yields decreased. We further explain the impact of small banks in the dealer network with respect to liquidity, and we illustrate the resilience of the bond markets during the COVID-19 pandemic. We use directed network graphs to visualise the net flows between the anonymised primary dealers and types and regions of investors based on aggregations of the granular data.
 

Non-technical summary

Disclaimer: This Working Paper should not be reported as representing the views of the ESM. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the ESM or ESM policy. No responsibility or liability is accepted by the ESM in relation to the accuracy or completeness of the information, including any data sets, presented in this Working Paper.

Keywords: Bond secondary market, investor behaviour, dealer behaviour, bond trading, bond turnover, bond liquidity, investor diversification, primary dealer, digitalisation, electronic trading platform, COVID-19 pandemic, bond market resilience
 
JEL codes: G12, G15, G23, G40

Source: European Stability Mechanism | Working Paper Series | Volume 2024 | No. 62 | July 2024 | 33 Pages
 

Copyright © European Stability Mechanism, 2024 | All rights reserved. Any reproduction, publication and reprint in the form of a different publication, whether printed or produced electronically, in whole or in part, is permitted only with the explicit written authorisation of the European Stability Mechanism.