Volatility of yields of government bonds among GIIPS countries during the sovereign debt crisis in the euro area


  • Tomas Heryan Silesian University in Opava
  • Jan Ziegelbauer Silesian University in Opava




yield of government bonds, volatility, GIIPS countries, GARCH and TARCH models


The aim of the paper is to estimate, how the volatility of yields of the Greek bonds affects yields? volatilities of bonds in selected European countries during the period of the sovereign debt crisis in the euro area. We obtained data for 10-year bonds in a weekly frequency from January 2006 till the end of December 2014. To make a comparison of pre-crisis period, we firstly investigate a bond yields? volatility before 15th September 2008, when U.S. Leman Brothers bankrupted and the global financial crisis had been reflected in full. However, the period of the global financial crisis could also negatively affect the development of government bonds. Therefore, the period after Leman Brothers? bankruptcy has been excluded and our crisis period starts after 23rd April 2010, when Greece asked the IMF for financial help and the sovereign debt crisis had been reflected in full. Volatility models GARCH (1,1), IGARCH (1,1) and TARCH (1,1) were used as an estimation method. To examine the risk premium of all GIIPS economies (Greece, Ireland, Italy, Portugal and Spain), we also compared the whole investigation with the developments of each spread against the yields of German government bonds. Our results clearly proved not only big differences between pre-crisis and crisis period, but also differences in output with the bond yield spreads. It was concluded that  there has been a higher impact of the Greek bond yields, as well as yield spreads volatility in 2010 and 2011, while it is on the lower level in pre-crisis period.


Download data is not yet available.


Antonakakis, N. & Vergos, K. (2013). Sovereign bond yield spillovers in the Euro zone during the financial and debt crisis. Journal of International Financial Markets, Institutions and Money, 26(1). http://dx.doi.org/10.1016/jint fin.2013.06.004.
Břešťan, R. (2011). Noční můra z Portugalska. Ekonom, 55(13).
Chionis, D., Pragidis, I., & Schizas, P. (2014). Long-term government bond yields and macroeconomic fundamentals: Evidence for Greece during the crisis-era. Finance Research Letters, 11(3). http://dx.doi.org/10.1016/j.frl.2014.02.003.
Claeys, P., & Vašíček, B. (2014). Measuring Bilateral Spillover and Testing Contagion on Sovereign Bond Markets in Europe. Journal of Banking and Finance, 46(C). 1 http://dx.doi.org/0.1016/j.jbankfin.2014.05.011.
Costantini, M., Fragetta, M., & Melina, G. (2014). Determinants of sovereign bond yield spreads in the EMU: An optimal currency area perspective. European Economic Review, 70(1). http://dx.doi.org/10.1016/j.euroecorev.2014.06.004.
Dolejš, R. (2010). Na flamenco času dost. Ekonom, 54(10).
Drachal, K. (2016). Analysis of a time-varying risk premium in the Visegrad group. MEST Journal, 4(1).
Drachal, K. (2015). The Structural Stability of a One-Day Risk Premium in View of the Recent Financial Crisis. Expert Journal of Economics, 3(2).
Ejsing, J., Grothe, M., & Grothe. O. (2015). Liquidity and credit premia in the yields of highly-rated sovereign bonds. Journal of Empirical Finance, 33(1). http://dx.doi.org/10.1016/j.jempfin.2015.04.001.
Engle, R. F., Focardi, S. M., & Fabozzi, F. J. (2007). ARCH/GARCH Models in Applied Financial Econometrics. In: Encyclopedia of Financial Models. Retrieved from http://onlinelibrary.wiley.com/doi/10.1002/9781118182635.ef m0062/ (13.12.2015).
Galariotis, E. C., Krokida, S. I., & Spyrou. S. I. (2015). Bond market investor herding: Evidence from the European financial crisis. International Review of Financial Analysis, January, http://dx.doi.org/10.1016/j.irfa.2015.01.001.
Guarín, A., Moreno J. F. & Vargas. H. (2014). An Empirical Analysis of the Relationship between US and Colombian Long-Term Sovereign Bond Yields. Ensayos sobre Política Económica, 32(74). http://dx.doi.org/10.1016/S0120-4483(14)70028-4.
Hruška, B. (2010). Zorba se zlobí. Ekonom, 54(7).
Němec, J. (2010). Z keltského tygra prasetem. Ekonom, 54(46).
Němec, J. (2011a). Od drachmy k euru a zpět. Ekonom, 55(20).
Němec, J. (2011b). Bankrot už není tabu. Ekonom, 55(38).
Němec, J. (2012). Účet na záchranu ?prasátek?? Kvůli Itálii až bilion eur. Ekonom, 56(25).
Stavárek, D. (2010). Exchange rate volatility and the asymmetric fluctuation band on the way to the Eurozone. Applied Economics Letters, 17(1). http://dx.doi.org/10.1080/13504850701719827.
Zhou, Y. (2014). Modeling the joint dynamics of risk-neutral stock index and bond yield volatilities. Journal of Banking & Finance, 38(1). http://dx.doi.org/10.1016/j.jbankfin.2013.10.010.




How to Cite

Heryan, T., & Ziegelbauer, J. (2016). Volatility of yields of government bonds among GIIPS countries during the sovereign debt crisis in the euro area. Equilibrium. Quarterly Journal of Economics and Economic Policy, 11(1), 61–74. https://doi.org/10.12775/EQUIL.2016.003



Monetary policy and interdependencies among financial markets