Risk Premiums in Slovak Government Bonds
Ludovit Odor () and
Pavol Povala ()
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Pavol Povala: Council for Budget Responsibility
No Discussion Paper No. 3/2016, Discussion Papers from Council for Budget Responsibility
We study risk premiums in Slovak government bonds. We focus on the country-specific part of yields which we associate with the spread to overnight-indexed swaps. In the period 2009-2015, we decompose the term structure of spreads to credit risk premium, liquidity premium, safety/convenience demand, and segmentation effects. While the level of the term structure of spreads is mostly related to sovereign credit risk, non-default components are related to the second principal component of spreads. We also identify a siezable effect of public sector purchase programme conducted by the European Central Bank with a magnitude in excess of 60 basis points for the ten-year bond. To study determinants of spreads in a longer sample 2000-2015, we construct credit spreads from international euro-denominated bonds. We find that debt-to-GDP ratio together with global financial variables explain a substantial fraction of spread variation.
Keywords: Risk premiums; yield curve models; sovereign credit risk; liquidity (search for similar items in EconPapers)
JEL-codes: F3 G1 G17 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec and nep-sog
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Persistent link: https://EconPapers.repec.org/RePEc:cbe:dpaper:201603
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