On Creditor Seniority and Sovereign Bond Prices in Europe

Frank Westermann and Sven Steinkamp ()

VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order from Verein für Socialpolitik / German Economic Association

Abstract: The recent increase of interest rate spreads in Europe and their apparent detachment from underlying fundamental variables has generated a debate on multiple equilibria in the sovereign bond market (see De Grauwe and Ji (2012)). We critically evaluate this hypothesis, by pointing towards an alternative explanation: the increasing share of senior lenders (IMF, ECB, EFSF, etc.) in the total outstanding government debt of countries in crisis. We illustrate the close relationship between senior tranche lending including Target2 balances and recent developments in the sovereign bond market, both graphically and in a formal regression analysis.

JEL-codes: F34 G12 H81 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-eec
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: On Creditor Seniority and Sovereign Bond Prices in Europe (2017)
Working Paper: On Creditor Seniority and Sovereign Bond Prices in Europe (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc13:79848

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