Work in Progress

Outages in Sovereign Bond Markets (R&R at Journal of Financial Economics)

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, merely reduce futures trading activity, 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,  📄 ▶️ 🏷️

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

Bunds (Bundesbank Discussion Paper coming soon)

This paper assembles a comprehensive non-anonymous transaction-level dataset for German Bunds. We document key market structure facts, present new evidence on cross-sectional Bund pricing, and evaluate two prominent reform proposals. The data reveal a market that is fragmented across venues and bonds, segmented across investor groups, and hierarchical around a dealer core. Liquidity concentrates in a small set of recently issued, futures-deliverable bonds, while many Bunds trade only sporadically and often not at all on a given venue-day. Trading is dispersed across hundreds of venues; even bilateral OTC, the single largest venue type, accounts for only a fraction of activity. On prices, repo specialness is capitalized into cash prices, but heavily traded Bunds are cheap: on-the-run Bunds are less special due to supply expansions from frequent re-issuances and hence trade at a discount. Studying a mandatory CCP scenario, we find larger potential benefits for Bunds than for U.S. Treasuries and U.K. Gilts. Using a structural model of dealer–investor trading, we show that venue centralization generates welfare gains only when dealer competition is sufficiently strong.

• • with Konrad Lucke and Willy Scherrieble

• Safe Asset Scarcity and Monetary Policy Transmission (Nguyen, Tomio and Vari, 2024)