The determinants of liquidity commonality in the Euro-area sovereign bond market

We examine time-series variation in liquidity commonality across sovereign benchmark bonds from 10 Euro-area countries, over a 7-year period using tick-by-tick data the inter-dealer market and study how it is driven by supply determinants (funding constraints of financial intermediaries) demand (investor sentiment, uncertainty, cross-market linkages with equity market) liquidity. Commonality does change time, tends to intensify stress periods as well around ECB policy meetings, we find stronger evidence favor side determinants.