Sovereign Bond Spreads in the EMU Peripheral Countries. The Role of the Outright Monetary Transactions
Sovereign Bond Spreads in the EMU Peripheral Countries. The Role of the Outright Monetary Transactions

Summary/Abstract: The paper examines determinants of sovereign bond spreads (in relation to Germany) of the peripheral euro area countries in the period 2007Q3–2015Q3. The study indicates that the introduction of the Outright MonetaryTransactions (OMTs) by the ECB in the third quarter of 2012 led to a change in the sensitivity of the spreads to the developments of certain macroeconomic fundamentals of these economies. In particular, the ratio of public debt to GDP, which significantly and strongly determined the spreads in the period 2007Q3–2012Q2, proved to be insignificant in the period 2012Q3–2015Q3. In addition, the counterfactual analysis carried out shows that the spreads in the analysed countries would have been much higher if the ECB had not decided to introduce this programme.

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