Impact of declining interest rates on European primary bond market


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The aim of this paper is to examine the growing popularity of debt financing in European based subjects. The development of issued volume was examined on the sample of 9,293 public debt offerings denominated in EUR issued between 30th November 2007 and 30th November 2016 and the impact of declining market interest rates on primary bond market was explored. More than 7.666 trillion EUR of debt were analyzed and the results indicate that despite low interest rates, the volume of issued bonds does not increase over time. Decline of interest rates only compensates slow economic growth as well as increasing global market and political risks.

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    • Figure 1. Volume of issued bonds by year
    • Figure 2. Number of issued bonds by year
    • Figure 3. Volume of issued bonds by region
    • Figure 4. Value of 10 year interest rate swap in EUR
    • Figure 5. Distribution of ordinary least squares residuals
    • Table 1. TOP 20 leading investment banks
    • Table 2. OLS results