Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153873
Authors: 
Ejsing, Jacob
Grothe, Magdalena
Grothe, Oliver
Year of Publication: 
2012
Series/Report no.: 
ECB Working Paper 1440
Abstract: 
This paper quantifies liquidity and credit premia in German and French government bond yields. For this purpose, we estimate term structures of government-guaranteed agency bonds and exploit the fact that any difference in their yields vis-`a-vis government bonds can be attributed to differences in liquidity premia. Adding the information on risk-free rates, we obtain model-free and model-based gauges of sovereign credit premia, which are an important alternative to the information based on CDS markets. The results allow us to quantify the price impact of so-called “safe haven flows”, which strongly affected bond markets in late 2008/early 2009 and again during some phases of the sovereign debt crisis. Thus, we show to what extent these effects disguised the increase of sovereign credit premia in the government yields of core euro area countries.
Subjects: 
bond markets
Liquidity premium
sovereign credit risk
state space models
yield curve modeling
JEL: 
E44
G12
G01
Document Type: 
Working Paper

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