Government Bond Risk Premiums in the EU revisited: The Impact of the Financial Crisis

Juergen von Hagen, Ludger Schuknecht and Guido Wolswijk

No 7499, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This note looks at US$ and DM/Euro denominated government bond spreads relative to US and German benchmark bonds before and after the start of the current financial crisis. The study finds, first, that bond yield spreads before and during the crisis can largely be explained on the basis of economic principles. Second, markets penalise fiscal imbalances much more strongly after the Lehman default in September 2008 than before. There is also a significant increase in the spread on non-benchmark bonds due to higher general risk aversion, and German bonds obtained a safe-haven investment status similar to that of the US which they did not have before the crisis. These findings underpin the need for achieving sound fiscal positions in good times and complying with the Stability and Growth Pact.

Keywords: Sovereign risk premiums; Bond markets; Financial crisis (search for similar items in EconPapers)
JEL-codes: G12 G15 (search for similar items in EconPapers)
Date: 2009-10
New Economics Papers: this item is included in nep-eec and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
https://cepr.org/publications/DP7499 (application/pdf)

Related works:
Journal Article: Government bond risk premiums in the EU revisited: The impact of the financial crisis (2011)
Working Paper: Government bond risk premiums in the EU revisited: the impact of the financial crisis (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:7499

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP7499

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().