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The Relationship Between Bond Yields, CDS Spreads, and Credit Ratings of Eurozone Countries After the European Debt Crisis

Author

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  • Mustafa Çavdar

    (İstanbul Commerce University)

Abstract

After the 2008-2009 global financial crisis, it has been argued that the relationship between sovereign credit ratings and sovereign bond yields is not consistent. It has been also claimedthat credit default swap contracts are better indicators than the credit ratings for measuring the credit risk of the underlying sovereign and cds contracts can be a good substitute of credit ratings. In and cds contracts can be a good substitute of credit ratings. In this study, the relationship between the 5-year eur denominated bond yields and 5-year cds premiums of austria, belgium, france, portugal, italy and spain was analyzed for the period between 2009 and 2015 by using daily data. In the second part, the relation between the credit ratings and the eurobond yields of these countries was examined.this study, the relationship between the 5-year eur denominated bond yields and 5-year cds premiums of austria, belgium, france, portugal, italy and spain was analyzed for the period between 2009 and 2015 by using daily data. In the second part, the relation between the credit ratings and the eurobond yields of these countries was examined.

Suggested Citation

  • Mustafa Çavdar, 2015. "The Relationship Between Bond Yields, CDS Spreads, and Credit Ratings of Eurozone Countries After the European Debt Crisis," Journal of Finance Letters (Maliye ve Finans Yazıları), Maliye ve Finans Yazıları Yayıncılık Ltd. Şti., vol. 30(104), pages 145-165, October.
    • Handle: RePEc:acc:malfin:v:30:y:2015:i:104:p:145-165
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