Sentiment Analysis of European Bonds 2016–2018

Frontiers in Artificial Intelligence 2:20, 2019

15 Pages Posted: 7 Sep 2019 Last revised: 21 Oct 2019

See all articles by Peter Schwendner

Peter Schwendner

Zurich University of Applied Sciences, Center for Asset Management

Martin Schüle

Zurich University of Applied Sciences, Institute of Applied Simulation

Martin Hillebrand

Frankfurt University of Applied Sciences

Date Written: October 15, 2019

Abstract

We revisit the discussion of market sentiment in European sovereign bonds using a correlation analysis toolkit based on influence networks and hierarchical clustering. We focus on three case studies of political interest. In the case of the 2016 Brexit referendum, the market showed negative correlations between core and periphery only in the week before the referendum. Before the French presidential elections in 2017, the French bond spread widened together with the estimated Le Pen election probability, but the position of French bonds in the correlation blocks did not weaken. In summer 2018, during the budget negotiations within the new Italian coalition, the Italian bonds reacted very sensitively to changing political messages but did not show contagion risk to Spain or Portugal for several months. The situation changed during the week from October 22 to 26, as a spillover pattern of negative sentiment also to the other peripheral countries emerged.

Keywords: sovereign bonds, contagion, sentiment, European sovereign bond crisis, correlation

JEL Classification: C14, G01, G11, G12, G15, D85

Suggested Citation

Schwendner, Peter and Schüle, Martin and Hillebrand, Martin, Sentiment Analysis of European Bonds 2016–2018 (October 15, 2019). Frontiers in Artificial Intelligence 2:20, 2019. Available at SSRN: https://ssrn.com/abstract=3446228 or http://dx.doi.org/10.2139/ssrn.3446228

Peter Schwendner (Contact Author)

Zurich University of Applied Sciences, Center for Asset Management ( email )

School of Management and Law
Technoparkstrasse 2
Winterthur, CH 8401
Switzerland

Martin Schüle

Zurich University of Applied Sciences, Institute of Applied Simulation ( email )

Institute of Applied Simulation
Einsiedlerstrasse 31a
Wädenswil, 8820
Switzerland

Martin Hillebrand

Frankfurt University of Applied Sciences ( email )

Nibelungenplatz 1
Frankfurt / Main, 60318
Germany

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