A macro-financial analysis of the euro area sovereign bond market

Arbeitspapier

We estimate the 'fundamental' component of euro area sovereign bond yield spreads, i.e. the part of bond spreads that can be justified by country-specific economic factors, euro area economic fundamentals, and international influences. The yield spread decomposition is achieved using a multi-market, no-arbitrage affine term structure model with a unique pricing kernel. More specifically, we use the canonical representation proposed by Joslin, Singleton, and Zhu (2011) and introduce next to standard spanned factors a set of unspanned macro factors, as in Joslin, Priebsch, and Singleton (2013). The model is applied to yield curve data from Belgium, France, Germany, Italy, and Spain over the period 2005-2013. Overall, our results show that economic fundamentals are the dominant drivers behind sovereign bond spreads. Nevertheless, shocks unrelated to the fundamental component of the spread have played an important role in the dynamics of bond spreads since the intensification of the sovereign debt crisis in the summer of 2011.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: NBB Working Paper ; No. 259

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Interest Rates: Determination, Term Structure, and Effects ; Financial Markets and the Macroeconomy ; Money and Interest Rates: Forecasting and Simulation: Models and Applications
• Thema: Euro area sovereign bonds ; yield spread decomposition ; unspanned macro factors ; fair spreads

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Dewachter, Hans ; Iania, Leonardo ; Lyrio, Marco ; de Sola Perea, Maite
• Ereignis: Veröffentlichung
• (wer): National Bank of Belgium
• (wo): Brussels
• (wann): 2014

Weitere Informationen

• Handle: http://hdl.handle.net/10419/144471
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ