Second, other researchers have postulated that the underlying determinants of the yield spread
today are materially different from the determinants that generated yield spreads
during prior decades.
Greek yield spreads
(with Germany) rose sharply last week, Portuguese yields have turned higher, and the Spanish spread has also started to widen.
Our main result appears robust and includes significant negative (positive) changes in yield spreads
to announcements of additions (departures) of highly connected directors.
The official integration of Eurozone financial markets was mostly a matter of membership in 1999 and resulted in sovereign yields converging across Eurozone countries, but yield spreads
quickly diverged during the financial crisis.
However, with GDP projections now positive and with investors appetite for risk returning we will see yield spreads
narrowing over a sustained period which will result in secondary assets performing better on a total return basis.
Greek bank shares jumped 7% at Monday's open as investors welcomed the improved bailout terms for Greece agreed at the euro zone summit on Friday and yield spreads
The recent widening of CMBS yield spreads
reflects the capital markets' negative evaluation of default risk in CMBS tranches.
Figure 1 illustrates the CBO five-year-ahead deficit/GDP forecasts and the corresponding yield spreads
over the January 1983-August 2005 period.
The authors found that higher yield spreads
signal greater risk inherent in the issuing company, as do debt issues with callable options.
For example, what proportion of yield spreads
on corporate bonds is explained by credit risk?
Growing divisions on budgetary policy could significantly widen government bond yield spreads
between the more and the less virtuous countries.
Some of these proposals suggest using subordinated-debt yield spreads
to supplement capital ratios as triggers for the prompt corrective action provisions of the Federal Deposit Insurance Corporation Improvement Act.