Euro area sovereign bond risk premia during the Covid-19 pandemic

Arbeitspapier

We decompose euro area sovereign bond yields into five distinct components: i) expected future short-term risk-free rates and a term premium, ii) default risk premium, iii) redenomination risk premium, iv) liquidity risk premium, and a v) segmentation (convenience) premium. Iden- tification is achieved by considering sovereign bond yields jointly with other rates, including sovereign credit default swap spreads with and without redenomination as a credit event fea- ture. We apply our framework to study the impact of European Central Bank (ECB) monetary policy and European Union (E.U.) fiscal policy announcements during the Covid-19 pandemic recession. We find that both monetary and fiscal policy announcements had a pronounced ef- fect on yields, mostly through default, redenomination, and segmentation premia. While the ECB's unconventional monetary policy announcements benefited some (vulnerable) countries more than others, owing to unprecedented exibility in implementing bond purchases, the E.U.'s fiscal policy announcements lowered yields more uniformly.

Angaben zum Objekt

• ISBN: 978-92-899-4747-3
• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: ECB Working Paper ; No. 2561

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes ; Portfolio Choice; Investment Decisions
• Thema: Sovereign bond yields ; ECB ; Kalman lter ; event study

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Corradin, Stefano ; Grimm, Niklas ; Schwaab, Bernd
• Ereignis: Veröffentlichung
• (wer): European Central Bank (ECB)
• (wo): Frankfurt a. M.
• (wann): 2021

Weitere Informationen

• DOI: doi:10.2866/316219
• Handle: http://hdl.handle.net/10419/237700
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ