We provide evidence for the euro area of spillovers from foreign public debt auctions into domestic secondary‐market auction cycles. We also confirm existing evidence of such spillovers from domestic issues into the domestic secondary market. Consistent with a theory of primary dealers’ limited risk‐bearing capacity, we find that auction cycles from domestic issues are stronger during the recent crisis period, whereas cross‐border effects are stronger in the precrisis period, but this evidence is not strong. This finding likely reflects the opposing effects of reduced sovereign bond market integration during the crisis and higher yield covariances caused by more market volatility.

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Highlights We model public debt maturities as a function of preference for liquidity services provided by short-term debt, roll-over risk and price risk. We construct a dataset on sovereign euro-area debt issues to explain maturity decisions of governments. Positive shocks to risk aversion, probability of non-repayment and demand for liquidity services increase yield curve level and slope. Positive shocks to risk aversion, probability of non-repayment and demand for liquidity services reduce average maturity of new debt issues. A forecast error variance decomposition shows that shocks to the non-repayment probability are quantitatively most important.