ESM Senior Funding Derivatives and Market Analyst Marko Mravlak with Martin Hillebrand, Lorenz Breitsamter and Peter Schwendner disscuss this question in the latest ESM Working Paper “Investor Activity in EFSF/ESM secondary bond markets”.

The authors look into the trading dynamics of these bonds from 2014 to 2020, exploring the roles of different market participants and the impact of digital trading platforms.

They discovered that private sector investors, particularly fund managers, significantly increased their presence in the market, making bold trades that carry high risks due to their large size or the bonds' extended maturities. In addition, the paper uncovers a fascinating pattern observed during the Covid pandemic: investors initially withdrew their capital, only to swiftly re-enter the market as they reassessed the risks involved. This behaviour underscores the stabilising influence of private capital in turbulent times.
 

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