This paper studies the impact of expected issuance fees on market liquidity in the Euro-area government bond market. We pose that investment banks have a dual role as primary dealer in the secondary market as well as competitor for lead manager in the primary market. Therefore, primary dealers have the incentive to increase liquidity due to competition for issuance fees. We find that the expected issuance fee is significantly related to market liquidity. Issuance fee driven liquidity is especially strong for countries with high funding needs, in periods of high uncertainty, and for bonds with low risk.

sovereign bonds, market microstructure, market liquidity, issuance fee
Asset Pricing (jel G12), Government Policy and Regulation (jel G18), Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies (jel G24)
Erasmus School of Economics

Buis, B, Pieterse-Bloem, M, Verschoor, W.F.C, & Zwinkels, R.C.J. (2017). Expected Issuance Fees and Market Liquidity. Retrieved from