Union Debt Management

•We study the role of government debt maturity in currency unions.•Can debt management help to hedge their budgets against spending shocks?•Empirically government portfolios have been effective in absorbing aggregate but not idiosyncratic fiscal risks.•Theoretically nominal bonds are not optimal to insure against idiosyncratic fiscal shocks in a currency area.•In contrast, long term inflation indexed debt allows governments to take full advantage of hedging.