The Importance of Being Earnest: Macroeconomic Determinants of Sovereign Bond Yield Spreads in the Eurozone

Bengoechea, Gonzalo Gómez

doi:10.2139/ssrn.2463679

Cited by 2 publications

(3 citation statements)

References 24 publications

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“…As expected, changes in bond yields are positively affected by changes in unemployment and by changes in inflation (Poghosyan, 2014;Bengoechea, 2012). The latter finding can be interpreted as a surprise effect, as short-run changes in inflation in excess of expectations result in a temporary decline of bond yields.…”

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confidence: 59%

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The determinants of Greek bond yields: an empirical study before and during the crisis

Chionis

Pragidis²,

Schizas³

2016

Journal of Economic Studies

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Purpose – The purpose of this paper is to uncover the determinants of the ten-year Greek bond yield in both pre- and post-crisis period that caused the unprecedented event, a country member of the Euro area, not to be able to tap the market. In doing so, following the recent literature, the authors employ two major set of variables, market driven and macroeconomic variables and the authors find two classes of results. Among others, debt to GDP ratio, deficit, inflation and unemployment, play a more significant role as determinants of the ten-years Greek bond yield during the crisis and second, the ten-years yield exceeds that fundamentals that price in. Moreover, the authors explicitly test for the impact of speculation on the yield. These results are in line with other empirical studies and shed line to the dramatic evolution of the bond yields in terms of fiscal consolidation era as it is in Greece. Since the Greek debt crisis is ongoing more than five years, policy makers should make substantial changes in their macro projections taking under consideration more the variables of inflation and unemployment, and release a viable concrete plan of debt relief, which among other, secures the success of the macro projections. Design/methodology/approach – Empirical study on Greek debt crisis applying both macroeconomics and market indicators in separated estimations. Findings – Debt to GDP ratio, deficit, inflation and unemployment among others, play a more significant role as determinants of the ten-years Greek bond yield during the crisis than had before and second, during the crisis ten-years yield is above the price that fundamentals would imply. Originality/value – To the best of the authors’ knowledge it is the first time that the authors study the Greek debt crisis applying fundamental and market factors.

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supporting

confidence: 59%

“…Moreover, during a crisis period there is an overreaction of the spreads with respect to its macroeconomic fundamentals. Bengoechea (2012), finds that debt to GDP ratio and unemployment rate has positive and significant impact on bond spreads while GDP deficit has not.…”

Section: Literature Reviewmentioning

confidence: 99%

The determinants of Greek bond yields: an empirical study before and during the crisis

Chionis

Pragidis²,

Schizas³

2016

Journal of Economic Studies

View full text Add to dashboard Cite

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“…He found that the country-specific and global explanatory variables on bond yield spreads vary across time and regions. Bengoechea (2012) tested the relationship of sovereign bond yields spreads and macroeconomic variables in the Eurozone. He found no constant relationships between macroeconomic variables and sovereign bond yield spreads.…”

Section: Literature Reviewmentioning

confidence: 99%

Determinants of Sukuk (Islamic Bonds) Yields

Shalhoob

2018

المجلة العلمیة للإقتصاد و التجارة

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Sukuk are a significant mode of financing in the Islamic financial system. Since their launch in the 1980s, Sukuk have gained recognition and popularity as a substitute for conventional bonds. Sukuk represent a proportional undivided ownership right in tangible assets, or a pool of predominantly tangible assets. The aim of this study to identify a number of factors that can be used to demonstrate the relationships between bond yields by employing OLS regression analysis. The results from the regression analysis suggested that maturity, size, Ijara, sovereign Sukuk, and credit rating have significant results on Sukuk yield. The findings of this study could be helpful for investors to get better risk-adjusted returns in bonds markets. For policy makers, it highlights the importance of further developments in Sukuk markets.

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The Importance of Being Earnest: Macroeconomic Determinants of Sovereign Bond Yield Spreads in the Eurozone

Cited by 2 publications

References 24 publications

The determinants of Greek bond yields: an empirical study before and during the crisis

The determinants of Greek bond yields: an empirical study before and during the crisis

Determinants of Sukuk (Islamic Bonds) Yields

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