Debt crisis and 10-year sovereign yields in Ireland and in Portugal

ABSTRACT

We assess the determinants of the 10-year sovereign yield for the period 2000–2015, in Portugal and in Ireland. Results show that the long-term Portuguese sovereign yield increased with the rise of the 10-year Bund yield and during the Securities Markets Programme, but decreased due to financial integration. Additionally, during the period of the economic and financial adjustment programme, there was evidence of additional rises (decreases) due to increases (decreases) in the 3-month Euribor rate, and the level of public debt. EU/IMF funding reduced sovereign yield.

KEYWORDS:

• 10-year sovereign yield
• economic and financial adjustment programme
• Portugal
• Ireland

JEL CLASSIFICATION:

• C20
• E44
• E62
• G01

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ The economic and financial adjustment programmes were implemented in different periods: Ireland (2011–2013) and Portugal (2011–2014).

² The estimations for Ireland include a first-order autoregressive coefficient of the error term (ρ) to solve autocorrelation problems.

Additional information

Funding

UECE is supported by Fundação para a Ciência e a Tecnologia (The Portuguese Foundation for Science and Technology).