Measuring Sovereign Bond Spillover in Europe and the Impact of Rating News

摘要: Interdependence has been commonly studied for stock or exchange rate markets. The recent European sovereign deft crisis shifted interest to bond Although there is by now strong evidence that risk premia are driven a common factor, little known about the detailed linkages between To fill this gap, we analyse bilateral EU markets over time, using forecast-error variance decompositions from VAR with daily data since 2000 on bonds yield spreads of countries. This framework allows measuring spillover shocks specific market other Our results indicate substantially increased 2007. However, lot heterogeneity in sent and received Spillover more important than domestic factors all EMU While CEE countries affect each mutually Denmark, Sweden, UK insulated impact Further, extend previous event-study rating news analyze dynamic ratings actions our framework. We find overall effect limited, which consistent claim most action do not come as surprise Yet, very heterogeneous; particular, it stronger downgrades, especially lower scale. Interestingly, often sovereigns domestically.