Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/154183 
Year of Publication: 
2014
Series/Report no.: 
ECB Working Paper No. 1750
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
This paper assesses how financial market participants form their expectations about future government bond spreads. Using monthly survey forecasts for France, Italy and the UK between January 1993 and December 2011, we test whether respondents consider the expected evolution of the fiscal balance—and other economic fundamentals—as significant drivers of the expected bond yield differential over a benchmark German 10-year bond. Our main result is that a projected improvement of the fiscal outlook significantly reduces expected sovereign spreads. Overall, the findings suggest that credible fiscal plans affect expectations of market experts, reducing the pressure on sovereign bond markets.
Subjects: 
Consensus Economics Forecast
market expectations
sovereign bond spreads
survey data
JEL: 
E62
G10
H30
ISBN: 
978-92-899-1158-0
Document Type: 
Working Paper

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