Sovereign Risk Premiums in the European Government Bond Market

Kerstin Bernoth (), Juergen von Hagen and Ludger Schuknecht

Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems from Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich

Abstract: This paper provides a study of bond yield differentials among EU government bonds issued between 1993 and 2005 on the basis of a unique dataset of issue spreads in the US and DM (Euro) bond market. Interest differentials between bonds issued by EU countries and Germany or the USA contain risk premiums which increase with fiscal imbalances and depend negatively on the issuer's relative bond market size. The start of the European Monetary Union has shifted market attention to debt service payments as the key measure of indebtedness and eliminated liquidity premiums in the euro area.

Keywords: asset pricing; determination of interest rates; fiscal policy; government debt (search for similar items in EconPapers)
JEL-codes: E43 E62 G12 H63 (search for similar items in EconPapers)
Date: 2006-05
New Economics Papers: this item is included in nep-eec, nep-fin, nep-fmk, nep-mac and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (56)

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Related works:
Journal Article: Sovereign risk premiums in the European government bond market (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:trf:wpaper:151

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