Unconventional Monetary Policy and Auction Cycles of Eurozone Sovereign Debt

We provide evidence that the European Central Bank (ECB's) unconventional monetary policy dampens yield cycles in secondary markets for Eurozone sovereign debt around new sovereign debt auctions. This dampening effect tends to be larger when market volatility is higher. Cycles caused by domestic auctions and the role of market volatility are largest for countries with low credit ratings. Auctions by these countries also generate significant auction cycles in other countries. Such cycles can have a nonnegligible effect on debt-servicing costs, but these can be limited through central bank purchases in turbulent periods, debt issuance in tranquil periods, and coordination of national auction calendars.