Working Paper: CEPR ID: DP3490
Authors: Peter Dunne; Michael J. Moore; Richard Portes
Abstract: The introduction of the euro on 1 January 1999 created the conditions for an integrated government bond market in the euro area. Using a unique data set from the electronic trading platform Euro-MTS, we consider what is the ?benchmark? in this market. We develop and apply two definitions of benchmark status that differ from the conventional view that the benchmark is the security with lowest yield at a given maturity. Using Granger-causality and cointegration methods, we find a complex pattern of benchmark status in euro-area government bonds.
Keywords: benchmark; cointegration; euro government bonds
JEL Codes: F36; G12; H63
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Italian bonds (G15) | French bond yields (E43) |
| Italian bonds (G15) | German bond yields (E43) |
| Italian bonds (G15) | Italian bond yields (E43) |
| French bonds (G15) | Italian bond yields (E43) |
| German bonds (H63) | other countries' bond yields (G15) |
| Cointegration of yields with benchmark bond (E43) | yields of other bonds (G12) |