Issue costs in the Eurobond market: The effects of market integration

Arie Melnik, Doron Nissim

Research output: Contribution to journalArticlepeer-review


This study compares the issuance costs of Eurobonds before and after the completion of the Economic and Monetary Union (EMU) in 2002. We find that the introduction of the Euro has significantly reduced the issue cost of Euro-denominated bonds compared to bonds denominated in the legacy currencies. The reduction in issue cost is not due to a decrease in underwriter compensation, but rather to the elimination of underpricing (the difference between the market price after trading commences and the offering price). Underwriter fee has declined substantially after the completion of the EMU, but this decline has been offset by an increase in underwriter spread (the difference between the offering price and the guaranteed price to the issuer), leaving total underwriter compensation unchanged. The EMU is also associated with significant reductions in bond maturity and syndicate size, consistent with its expected effects on liquidity and issue costs in the Eurobond market.

Original languageEnglish
Pages (from-to)157-177
Number of pages21
JournalJournal of Banking and Finance
Issue number1
StatePublished - Jan 2006


  • EMU
  • Eurobonds
  • Issue costs
  • Underpricing
  • Underwriter compensation

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


Dive into the research topics of 'Issue costs in the Eurobond market: The effects of market integration'. Together they form a unique fingerprint.

Cite this