Abstract:This study examines the interrelationship of asset swap spreads on government and mortgage covered bonds in Germany, France, Italy, and Spain between 2007 and mid-2014. Using a local least squares estimator with time varying parameters, we find that in all of the four countries under investigation, the pattern of spread movements for these two bond classes underwent significant changes over time. In Germany, where the confidence of market participants in the solidity of public finances appears to be largely un… Show more
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