The determinants of sovereign bond yield spreads in the EMU

Antonio Afonso, Michael Arghyrou and Alexandros Kontonikas ()

No 1781, Working Paper Series from European Central Bank

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. JEL Classification: C23, E62, H50

Keywords: credit ratings; government debt; panel analysis; sovereign yields (search for similar items in EconPapers)
Date: 2015-04
New Economics Papers: this item is included in nep-eec
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Citations: View citations in EconPapers (42)

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Related works:
Working Paper: The determinants of sovereign bond yield spreads in the EMU (2012)
Working Paper: The determinants of sovereign bond yield spreads in the EMU (2012)
Working Paper: The determinants of sovereign bond yield spreads in the EMU (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20151781

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