LIQUIDITY PREMIA IN GERMAN GOVERNMENT BONDS

There is strong evidence that on-the-run U.S. Treasury securities trade muchmore liquidly and at significantly higher prices than their off-the-run counterparts.We examine if the same phenomenon is present in the German government bondmarket whose market structure differ markedly from that of the U.S. Treasurymarket. In sharp contrast to the U.S. evidence, we find that on-the-run statushas only a negligible effect on the liquidity and pricing once other factors havebeen controlled for. Instead, the highly...