The Management of Public Bond Spreads Before and After Euroland.

The perspective taken in this paper is strictly narrowed to the strategic choice of the composition of public debt, as opposed to the determination of the total amount borrowed. Thus, it takes as given the level of taxes and government expenditures at the moment of the choice of debt composition, and introdices their impact on their current and future costs. Such an approach allows to stick to the financial modeling of yield spreads and the identification of its determinants. The first section proposes a model for optimal choice of market and maturity for countries that do not belong to a monetary union like EMu. The next section analyses the impact of EMU on the problem, including the potential role of a coordination agency.