Fragmentation and heterogeneity in the euro–area corporate bond market: back to normal?

  • We assess the degree of market fragmentation in the euro-area corporate bond market by disentangling the determinants of the risk premium paid on bonds at origination. By looking at over 2,400 bonds we are able to isolate the country-specific effects which are a suitable indicator of the market fragmentation. We find that, after peaking during the sovereign debt crisis, fragmentation shrank in 2013 and receded to pre-crisis levels only in 2014. However, the low level of estimated market fragmentation is coupled with a still high heterogeneity in actual bond yields, challenging the consistency of the new equilibrium.

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Author:Andrea ZaghiniORCiDGND
Parent Title (English):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 530
Series (Serial Number):CFS working paper series (530)
Publisher:Center for Financial Studies
Place of publication:Frankfurt, M.
Document Type:Working Paper
Date of Publication (online):2016/02/19
Date of first Publication:2016/02/19
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2016/04/05
Tag:corporate bond market; financial fragmentation; sovereign debt crisis
Page Number:31
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht