DP3490 Defining Benchmark Status: An Application using Euro-Area Bonds

Author(s): Peter Dunne , Michael J Moore , Richard Portes

Publication Date: August 2002

Keyword(s): benchmark , euro government bonds , cointegration

JEL(s): F36 , G12 , H63

Programme Areas: Financial Economics , International Macroeconomics

Link to this Page: www.cepr.org/pubs/dps/DP3490.asp

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.