Sovereign Risk, European Crisis Resolution Policies and Bond Yields

Kilponen, Juha; Laakkonen, Helinä; Vilmunen, Jouko

doi:10.2139/ssrn.2102461

Sovereign Risk, European Crisis Resolution Policies and Bond Yields

International Journal of Central Banking Volume 11, Number 2, March 2015: 285-323

Bank of Finland Research Discussion Paper No. 22/2012

29 Pages Posted: 9 Jul 2012 Last revised: 5 Mar 2015

See all articles by Juha Kilponen

Jouko Vilmunen

Bank of Finland, Research Unit

Date Written: June 15, 2012

Abstract

We study the effects of the ECB monetary policy and the European crisis resolution policies on the 10 year sovereign bond yields of seven European countries. We find that some of the decisions have had significant impact on sovereign bond yields and have succeeded in reducing stress in the financial markets. However, the impact of the same policy decision might have been positive for some countries while negative for others, suggesting that contagion effects may be important. The economically most significant effects on the bond yields have been due to the announcement of ECB's Securities Market Programme.

Keywords: bond markets, policy effects, liquidity, European sovereign debt crisis, monetary policy

JEL Classification: F34, E42, G15

Suggested Citation: Suggested Citation

Kilponen, Juha and Laakkonen, Helinä and Vilmunen, Jouko, Sovereign Risk, European Crisis Resolution Policies and Bond Yields (June 15, 2012). International Journal of Central Banking Volume 11, Number 2, March 2015: 285-323 ; Bank of Finland Research Discussion Paper No. 22/2012. Available at SSRN: https://ssrn.com/abstract=2102461 or http://dx.doi.org/10.2139/ssrn.2102461