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Working papers

Title: Investor demand in syndicated bond issuances: stylised facts

Download PDF: Working Paper 50

This paper analyses investor demand dynamics in primary bond markets, looking at different market segments, investor types, pricing impact, and demand overshooting.

Authors: Martin Hillebrand (ESM), Marko Mravlak (ESM), Peter Schwendner (Zurich University of Applied Sciences)



This study analyses investor demand in syndicated EFSF and ESM bond issuances from 2014 to 2020 on an unprecedented granularity level of individual orders. In particular, we investigate three main aspects of order book dynamics: first, we determine the main factors segmenting investor demand. Second, we analyse price dynamics in the transactions and its relation to investor demand. Third, we examine whether there are any indications of order book inflation that might explain the increased volatility in order book volume. We identify issuance tranche and tenor as the main determinants of investor demand, which are to a large extent anticipated by the envisaged notional amount of the issuance. Further, we note that the pricing of ESM bond issuances is carried out in an economical manner, i.e. the new issue premium tends to be lower in a market context with large demand. Lastly, we look at the drivers of large order books and find a mixture of above average number and volume of orders. This confirms that there are no indications of order book inflation tendencies in the analysed time period..

Disclaimer: This Working Paper should not be reported as representing the views of the ESM. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the ESM or ESM policy. No responsibility or liability is accepted by the ESM in relation to the accuracy or completeness of the information, including any data sets, presented in this Working Paper.

Keywords: Investor demand, bond issuance, bond syndication, bond primary market, investor behaviour, order books, order book inflation, new issue premium

JEL codes: G12, G15, G23, G40

Source: European Stability Mechanism | Working Paper Series | Volume 2021 | No 50 | December 2021 | 20 Pages

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