FRANKFURT (MNI) – The large sovereign bonds spreads between
Eurozone countries do not only reflect perceived risks, European Central
Bank Vice-President Lucas Papademos said on Monday.
Speaking during an ECB conference on financial integration,
Papademos observed that while a “large part of the fluctuations in the
[sovereign bond yields] during the crisis was due to changes in the
relative pricing of credit risks, other factors also influenced the
pricing of government debt.”
“There is evidence that market liquidity conditions played a vital
role in the widening of sovereign bond spreads during the crisis,”
Papademos said.
Papadmos used developments in sovereign bond yield spreads between
German and French government to substantiate his argument.
“In March 2009 the difference between their ten-year bond yields
reached more than 50 basis points,” he recalled.
At the same time, however, debt securities issued by state owned
banks French CADES and German KfW — which are backed by their
respective governments should thus be subject to the same risk
assessment — remained “remarkably stable,” Papademos said.
“This suggests that there were no significant changes in the
perceived relative credit quality, but liquidity factors favored the
German bond market,” he concluded.
–Frankfurt bureau: +49-69-720 142, email: jtreeck@marketnews.com
[TOPICS: M$$EC$,MGX$$$,M$$CR$,M$X$$$]