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Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Bond Losses in Post‐Auction Resale Markets
T2 - Causes and Consequences
AU - Barbosa, Klenio
AU - De Silva, Dakshina G.
AU - Yang, Liyu
AU - Yoshimoto, Hisayuki
PY - 2024/12/23
Y1 - 2024/12/23
N2 - This paper examines the primary-dealers' returns in post-auction resale markets for treasury bonds, assesses the prevalence of losses and gains and their consequences for the financial sector. Using a novel database that tracks more than 2350 primary-to-secondary transactions, we find that bond losses for primary-dealers are pervasive and were severe during the financial crisis. Our results indicate that liquidity constraint is a major source of the bond losses. We also find that financial sector value is correlated with these losses. Using an alternating market experiment, we show that primary-to-secondary losses are higher under discriminatory auctions as compared to uniform auctions.
AB - This paper examines the primary-dealers' returns in post-auction resale markets for treasury bonds, assesses the prevalence of losses and gains and their consequences for the financial sector. Using a novel database that tracks more than 2350 primary-to-secondary transactions, we find that bond losses for primary-dealers are pervasive and were severe during the financial crisis. Our results indicate that liquidity constraint is a major source of the bond losses. We also find that financial sector value is correlated with these losses. Using an alternating market experiment, we show that primary-to-secondary losses are higher under discriminatory auctions as compared to uniform auctions.
U2 - 10.1002/ijfe.3068
DO - 10.1002/ijfe.3068
M3 - Journal article
JO - International Journal of Finance and Economics
JF - International Journal of Finance and Economics
SN - 1076-9307
ER -