The determinants of sovereign bond yield spreads in the EMU

Afonso, Antonio, Arghyrou, Michael Georgiou ORCID: https://orcid.org/0000-0001-6222-5086 and Kontonikas, Alexandros 2012. The determinants of sovereign bond yield spreads in the EMU. [Working Paper]. ISEG Economics Working Paper, vol. 36. Lisbon: Technical University of Lisbon - School of Economics and Management (ISEG).

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Abstract

We use a panel of euro area countries to assess the determinants of long-term sovereign bond yield spreads over the period 1999.01-2010.12. We find that, unlike the period preceding the global financial crisis, European government bond yield spreads are well explained by macro- and fiscal fundamentals over the crisis period. We also find that the menu of macro and fiscal risks priced by markets has been significantly enriched since March 2009, including the risk of the crisis’ transmission among EMU member states, international risk and liquidity risk. Finally, we find that sovereign credit ratings are statistically significant in explaining spreads, yet compared to macro- and fiscal fundamentals their role is limited.

Item Type:	Monograph (Working Paper)
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > HB Economic Theory J Political Science > JN Political institutions (Europe)
Uncontrolled Keywords:	sovereign yields, government debt, panel analysis, credit ratings
Additional Information:	Working Paper No. 36/2012/DE/UECE
Publisher:	Technical University of Lisbon - School of Economics and Management (ISEG)
Last Modified:	24 Oct 2022 11:40
URI:	https://orca.cardiff.ac.uk/id/eprint/48924

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