The COVID-19 Pandemic and Sovereign Bond Risk
21 Pages Posted: 21 May 2020
Date Written: May 17, 2020
Governments around the world are tackling the COVID-19 pandemic with a mix of public health, fiscal, macroprudential, monetary, or market-based policies. We assess the impact of the pandemic in Europe on sovereign CDS spreads using an event study methodology. We find that a higher number of cases and deaths and public health containment responses significantly increase the uncertainty among investors in European government bonds. Other governmental policies magnify the effect in the short run as supply chains are disrupted.
Suggested Citation: Suggested Citation