Work in Progress

Outages in Sovereign Bond Markets

• • We exploit outages in sovereign bond markets as natural experiments. When the euro area futures market goes down, trading volumes on the cash market decline, liquidity evaporates, and prices deviate from fundamental values. Micro-level evidence reveals two mechanisms: the loss of a hedging instrument reduces dealers’ intermediation capacity, and the missing benchmark price widens information asymmetries for clients. Outages on the cash market, in contrast, barely affect the futures market, implying one-way price formation and liquidity provision. Our findings highlight the trade-offs of market centralization, support cross-asset learning over symmetric arbitrage models, and demonstrate how intermediaries impose limits to arbitrage.

  • with Caspar Helmus, October 2025 version, 🏷️ 

  • runner-up for ESRB's 2024 Ieke van den Burg Prize for research on systemic risk