The effects of debt crisis-related policy decisions in European sovereign bond markets

Abstract

The article discusses the effects of policy decisions related to the management of the European debt crisis on long-term government bond yields in seven euro area countries. According to the results, some of the policy decisions have had a significant impact on sovereign bond yields and have succeeded in increasing stability. As uncertainty is high during crisis, it is important that policy measures are as concrete and as transparent as possible, as is the case for the ECB s long-term refinancing operations. However, temporary liquidity support is not enough to stabilise the markets; rather, confidence is gained by fiscal consolidation and improved solvency.