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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/65389
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| Title: | | On creditor seniority and sovereign bond prices in Europe  |
| Authors: | | Steinkamp, Sven Westermann, Frank |
| Issue Date: | | 2012 |
| Series/Report no.: | | CESifo Working Paper: Monetary Policy and International Finance 3944 |
| Abstract: | | The recent increase of interest rate spreads in Europe and their apparent detachment from underlying fundamental variables has generated a debate on multiple equilibria in the sovereign bond market (see De Grauwe and Ji (2012)). We critically evaluate this hypothesis, by pointing towards an alternative explanation: the increasing share of senior lenders (IMF, ECB, EFSF, etc.) in the total outstanding government debt of countries in crisis. We illustrate the close relationship between senior tranche lending - including Target2 balances - and recent developments in the sovereign bond market, both graphically and in a formal regression analysis. |
| Subjects: | | government bond spreads Eurozone senior tranche lending multiple equilibria sovereign debt crisis Target2 |
| JEL: | | F34 G12 H81 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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