 German Bond Yields and Debt Supply: Is There a “Bund Premium”?Anne-Charlotte Paret and Anke Weber No 2019/235, IMF Working Papers from International Monetary Fund Abstract: Are Bunds special? This paper estimates the “Bund premium” as the difference in convenience yields between other sovereign safe assets and German government bonds adjusted for sovereign credit risk, liquidity and swap market frictions. A higher premium suggests less substitutability of sovereign bonds. We document a rise in the “Bund premium” in the post-crisis period. We show that there is a negative relationship of the premium with the relative supply of German sovereign bonds, which is more pronounced for higher maturities and when risk aversion proxied by bond market volatility is high. Going forward, we expect German government debt supply to remain scarce, with important implications for the ECB’s monetary policy strategy. Keywords: WP; convenience yield; long-term debt; Sovereign Bond Yields; Bond Supply; Central Bank Quantitative Easing; debt supply; demand curve; bond premium; Bund yield; Bund premia; bond volatility; government bond yield; Sovereign bonds; Bonds; Bond yields; Yield curve; Global (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2019/235 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC. |
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