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The determinants of sovereign bond yield spreads in the EMU

Afonso, Antonio, Arghyrou, Michael Georgiou and Kontonikas, Alexandros 2015. The determinants of sovereign bond yield spreads in the EMU. [Working Paper]. Frankfurt: European Central Bank. Available at: https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1781...

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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, on top of the fundamentals themselves, changes in the sensitivity of bond prices to fundamentals are also necessary to explain yields 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 international financial 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 > HG Finance
Uncontrolled Keywords: sovereign yields, government debt, panel analysis, credit ratings
Publisher: European Central Bank
ISBN: 9789289915946
Date of First Compliant Deposit: 30 March 2016
Last Modified: 04 Jun 2017 08:08
URI: http://orca.cf.ac.uk/id/eprint/73331

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