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Bond Yield Compression In The Countries Converging To The Euro, Lucjan T. Orlowski, Kirsten Lommatzsch
Bond Yield Compression In The Countries Converging To The Euro, Lucjan T. Orlowski, Kirsten Lommatzsch
WCBT Faculty Publications
We demonstrate that bond yield compression is under way in the countries converging to the euro and that German yields are significant drivers of local currency yields. Based on the evidence from Poland, Hungary and the Czech Republic, we conclude that these new ...Member States of the European Union are ready to adopt the euro without risking a disruptive shock to their financial stability. This message transpires from investigating the daily volatility dynamics of local bond yields as a function of German yields, conditional on changes in local term spreads, exchange rates and adjustments to central bank reference rates. Similar …