Country risk and required yield on the government bonds after the outbreak of the financial crisis, 2009-2014
Gospodarska gibanja 480
Macroeconomic performance explains a large part of government bond yields' variation around the world. Estimated on a sample of 23 states with a total population of four billion inhabitants and then estimated again in groupings for the large countries, developed countries or selected EU Members States, there is a significant statistical connection between changes in the GDP, current account, central bank’s interest rates and fiscal balance that lead to changes in government bond yields. In the group of economically developed countries the governments bond yield is also affected by changes in the stock exchange index, and in the group of EU Member States for the period 2009–2014 there was a statistically significant negative time trend. In the period of 2009–2014 the government bond yields were moderately affected by changes of GDP or changes in inflation and strongly under the influence of central bank interest rates.
Larger negative changes in the economic environment do not lead to a significant increase in the required yields. In the case of deep imbalance in a given government's finances (ranging 5% of GDP) the yield would increase by one percentage point; in the case of disturbed external balance (also by 5% of GDP) the government’s bond yield would increase by 0.5 of a percentage points, while a jump in the central bank’s interest rate by five percentage points could affect the increase in the required government bond yield by 3 percentage points.
Key words: Bonds, Yield, Public debt, International financial markets, Macroeconomics
JEL: E43, E44, E47, E65, F32, F34, F41, G15, H63
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