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Does news on the euro area impact the sovereign yield spreads?

Author

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  • Houssam Bouzgarrou
  • Tarek Chebbi

Abstract

This paper presents the impact of news on euro area sovereign bond yield spreads vis-à-vis Germany at daily frequency. The analysis is conducted for both 5- and 10-year debts for the period from 15 May, 2012 until 23 April, 2014. An innovative aspect of the study lies in the use of 'Eurointelligence' newsflash to construct our news data. Our empirical analysis produces a number of novel results that support the evidence that news is an important driver for sovereign yield spreads. We specifically find that more news regarding the country-specific crisis raises the yield spreads. Moreover, we find that higher news in one selected country implies an increase in the yield spreads of other countries. Regarding volatility of debt market, it seems to be in most cases of analysis uncorrelated to news. Interesting implications emerge from this paper namely for the asset pricing and risk management.

Suggested Citation

  • Houssam Bouzgarrou & Tarek Chebbi, 2015. "Does news on the euro area impact the sovereign yield spreads?," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 8(1), pages 4-19.
    • Handle: RePEc:ids:ijmefi:v:8:y:2015:i:1:p:4-19
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    Citations

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    Cited by:

    1. Wildmer Daniel Gregori & Wildmer Agnese Sacchi, 2016. "Has the Grexit news spilled over into euro area financial markets? The role of domestic political leaders, supranational executives and institutions," Mo.Fi.R. Working Papers 134, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    2. Gregori, Wildmer Daniel & Sacchi, Agnese, 2019. "Has the Grexit news affected euro area financial markets?," The North American Journal of Economics and Finance, Elsevier, vol. 49(C), pages 71-84.
    3. Irfan Ahmed & Claudio Socci & Francesca Severini & Rosita Pretaroli & Hassan Kasady Al Mahdi, 2020. "Unconventional monetary policy and real estate sector: a financial dynamic computable general equilibrium model for Italy," Economic Systems Research, Taylor & Francis Journals, vol. 32(2), pages 221-238, April.
    4. Houssam Bouzgarrou & Tarek Chebbi, 2016. "The reaction of sovereign CDS spread volatilities to news announcements," Journal of Asset Management, Palgrave Macmillan, vol. 17(5), pages 347-360, September.

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