An empirical analysis on the determinants of CEE government bond spreads

Determinants of sovereign risk premia for European emerging markets

“…According to their results, economic fundamentals did not seem to be the main driving force of spread movements over time, suggesting they were highly infl uenced by market sentiment. A similar conclusion was presented by Ebner (2009), who gave an overview of the development of euro-denominated sovereign bonds in the CEE region, and showed that higher market volatility is the most important factor infl uencing spreads.…”

Fiscal determinants of government borrowing costs: do we have only ourselves to blame?

“…They show that, even though fiscal variables have a statistically significant effect on the dependent variable, in the majority of specifications the indicator of general risk aversion can explain most of the differences in yields and it considerably amplifies the effects of other variables included in the model. The importance of market sentiment was also confirmed by Ebner (2009) who used data on Central and Eastern Europe government bond spreads. He shows that market sentiment measured by VDAX-NEW index, the ECB reference rate and market liquidity have a dominant effect on selected countries spreads, while variables that reflect macroeconomic and fiscal developments in most countries showed not to be statistically significant.…”

The Significance of Country-specific and Common Risk Factors for CEE Government Bond Spreads Changes

“…The most important single-country time series study for European transition economies was performed by Ebner (2009), who concluded that the external risk aversion, captured in this case by market volatility, as opposed to macroeconomic variables, was more important in explaining spreads. Moreover, similarly to the Ebner (2009) study, Nickel et al (2009) analysis concluded that variables, that are traditionally used as determinants of bond spreads in the euro area, appeared to explain much less when applied to CEE.…”

“…By contrast, Caceres et al (2010) noted that in the beginning of the crisis, the growth in global risk aversion was a significant factor for changes of the euro area sovereign spreads, while subsequently country-specific factors became more significant for investors. Moreover, Ebner (2009) concluded that the importance and the weight of influence of country-specific factors varies across countries but external risk aversion is the single most important explanatory factor of spreads.…”

“…These two fiscal variables correspond to the main sources of information for investors to explain expectations on a country's fiscal position and the association to the default risk. According to Ferrucci (2003), J. von Hagen (2011), and Ebner (2009, these two indicators are expected to have a strong relationship on spreads. If the country gets closer to the bottom limit set through the Stability and Growth Pact, it casts doubt of the probability of the non-fulfilled country's debt commitments and increases the risk of default on sovereign debt.…”