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Euro public debt and the markets: sovereign fundamentals and CDS market dynamics

Author

Listed:
  • Boone, L.
  • Fransolet, L.
  • Willemann, S.

Abstract

At the onset of the crisis, euro area – like all Organisation for Economic Co-operation and Development (OECD) countries – public finances have massively inflated, as is typical in financial crises. The major difference with the past is threefold: the synchronicity across countries of the increase, the debt levels which have been reached; and the existence of credit default swap (CDS) market which has influenced the dynamic of sovereign trading. In this note, we review quickly fundamentals before highlighting the role of the CDS market and the implications for sovereign trading.

Suggested Citation

  • Boone, L. & Fransolet, L. & Willemann, S., 2010. "Euro public debt and the markets: sovereign fundamentals and CDS market dynamics," Financial Stability Review, Banque de France, issue 14, pages 19-26, July.
    • Handle: RePEc:bfr:fisrev:2010:14:3
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    Cited by:

    1. Patrick Augustin, 2012. "Sovereign Credit Default Swap Premia," Working Papers 12-10, New York University, Leonard N. Stern School of Business, Department of Economics.
    2. Vogel, Heinz-Dieter & Bannier, Christina E. & Heidorn, Thomas, 2013. "Functions and characteristics of corporate and sovereign CDS," Frankfurt School - Working Paper Series 203, Frankfurt School of Finance and Management.
    3. Alessandro Carboni, 2011. "The sovereign credit default swap market: price discovery, volumes and links with banks' risk premia," Temi di discussione (Economic working papers) 821, Bank of Italy, Economic Research and International Relations Area.
    4. Agostino Capponi & Martin Larsson, 2014. "Will banning naked CDS impact bond prices?," Annals of Finance, Springer, vol. 10(3), pages 481-508, August.
    5. Christina E. Bannier & Thomas Heidorn & Heinz-Dieter Vogel, 2014. "Characteristics and development of corporate and sovereign CDS," Journal of Risk Finance, Emerald Group Publishing, vol. 15(5), pages 482-509, November.

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