The CDS and the Government Bonds Markets During the Last Financial Crisis

France Križaniè Žan Jan Oplotnik
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France Križaniè Žan Jan Oplotnik: EIPF Ltd. Economic institute, Ljubljana, Slovenia University of Maribor, Faculty of Economics and Business, Maribor, Slovenia

Zagreb International Review of Economics and Business, 2015, vol. 18, issue 2, 21-30

Abstract: Financial market had developed a special instrument to insure the buyers of bonds. This instrument is so called Credit Default Swap (CDS). The CDS price is a kind of insurance premium that the buyer of CDS pays to the seller of CDS in exchange for compensation of possible loss in operation. Paper analyses causality between CDS price and dynamics of bond yields and influence of macroeconomic factors on it in four selected countries during the last financial crisis. Analysis results show that there is no important macroeconomic variable included in the analysis that preceded the CDS prices connected with German government bonds. Sellers of CDS were apparently aware of the systemic nature of the financial crisis in the euro area. In the case of the United Kingdom, Russia and Slovenia we can observe the unemployment rate as the most important macroeconomic variable that preceded the CDS prices for government bonds. JEL Classification: E44; F34; G15

Keywords: Bonds; Yield; CDS; International fi nancial markets; Macroeconomics (search for similar items in EconPapers)
Date: 2015
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