ECB paper looks at ‘sub-sovereign’ bond yield spreads
Researchers find debt levels and risk aversion are important factors
A working paper published by the European Central Bank (ECB) investigates the yields on bonds issued by "sub-sovereign entities within federations".
In Determinants of sub-sovereign bond yield spreads: the role of fiscal fundamentals and federal bailout expectations, the authors investigate how these bonds are affected by bailout expectations and investors' risk appetite.
The paper uses a novel data set including information on bonds issued by "Australian states, Canadian provinces, Swiss
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