European Economic and Monetary Union Sovereign Debt Markets

This paper focuses on developments in the European Economic and Monetary Union sovereign debt markets in the past decade. The first part analyzes the integration and segmentation structure of the bond markets of the Economic and Monetary Union before and after the sovereign debt crisis, by introducing the novel concept of correlation-based stable networks. Accordingly, a fair integration is observed between the bond markets during the pre-crisis period. However, a strict segmentation emerges, separating the members struggling with debt problems and the ones with relatively strong fiscal performances during the sovereign debt turmoil. The segmentation structure is clearly visualized, revealing the potential paths for crisis and recovery transmission in the future. In the second part, the paper comments on the recent decreasing trend in Economic and Monetary Union member bond yields and their increasing degree of co-movement. Accordingly, the paper argues that these changes do not depend on the fiscal performances of the member countries, but depend on the illusion of quality that appeared with the Fed (U.S. Federal Reserve) tapering signals in early 2013.

Bibliographic Details

Main Authors:	Sensoy, Ahmet, Hacihasanoglu, Erk, Rostom, Ahmed
Language:	English en_US
Published:	World Bank Group, Washington, DC 2015-01
Subjects:	ASSET CLASS, BASIS POINTS, BENCHMARK GOVERNMENT BOND, BENCHMARK YIELD, BOND, BOND MARKET, BOND MARKETS, BOND SPREADS, BOND YIELD, BOND YIELDS, BUDGET DEFICIT, BUSINESS DEVELOPMENT, CAPITAL FLOWS, CAPITAL OUTFLOWS, CENTRAL BANK, CENTRAL BANK INDEPENDENCE, CENTRAL BANKS, COMMODITY, CONNECTIVITY, CONTAGION, COVARIANCE MATRIX, CREDITORS, CROSS-BORDER CAPITAL, CURRENCY, DEBT CRISIS, DEBT MARKET, DEBT-SERVICE, DEFICITS, DEPRECIATIONS, ECONOMIC POLICY, ECONOMICS, EMERGING MARKETS, EMU, EQUILIBRIA, EQUITY MARKETS, EXCESS LIQUIDITY, FEDERAL RESERVE, FINANCIAL CRISIS, FINANCIAL MARKETS, FINANCIAL SECTOR, FINANCIAL STABILITY, FINANCIAL STUDIES, FINANCIAL SYSTEMS, FISCAL IMBALANCES, FISCAL POLICIES, FISCAL POSITIONS, FOREIGN EXCHANGE, GLOBAL BANKING, GOVERNMENT BOND, GOVERNMENT BOND MARKET, GOVERNMENT BOND YIELDS, GOVERNMENT BONDS, INFLATION, INTEREST RATES, INTERNATIONAL BANK, INTERNATIONAL MONEY, LEVERAGE, LIQUIDITY, LIQUIDITY RISKS, MACROECONOMIC MODELS, MARKET DYNAMICS, MARKET INTEGRATION, MARKET PLAYERS, MONETARY POLICY, MONETARY UNION, MONEY MARKET, OPTIMAL ALLOCATION, POLICY RESPONSES, POLITICAL ECONOMY, PORTFOLIO, RANDOM VARIABLES, RISK PREMIUMS, SERIAL CORRELATION, SINGLE ASSET, SINGLE CURRENCY, SOVEREIGN BOND, SOVEREIGN BONDS, SOVEREIGN DEBT, SOVEREIGN DEBT MARKET, SOVEREIGN DEBT MARKETS, SOVEREIGN RISK, SOVEREIGN YIELDS, STANDARD DEVIATION, STOCK MARKET, STOCK MARKET VOLATILITY, STRUCTURAL REFORMS, SYSTEMIC RISK, UPWARD PRESSURE, VOLATILITIES, YIELD CURVES, YIELD MOVEMENTS, YIELD SPREADS,
Online Access:	http://documents.worldbank.org/curated/en/2015/01/23170489/european-economic-monetary-union-sovereign-debt-markets https://hdl.handle.net/10986/21146
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