The Determinants of Sovereign Bond Yields in the EMU: New Empirical Evidence

Hazar Altinbas, Vincenzo Pacelli, Edgardo Sica


This paper investigates the determinants of sovereign bond yields in the case of ten Economic and Monetary Union (EMU) countries (five core economies and five peripheral countries) for the period of 2001-2015. To this end, we carry out a two-step methodology based on (i) a principal component analysis of the countries’ yields, which is aimed at splitting our sample into sub-periods, and (ii) a random forest model to investigate the determinants of bond yields in any identified sub-period enhanced with a variable selection process with simulated annealing. Our analysis indicates that macroeconomic fundamentals (especially the unemployment rate, the inflation rate and the government debt to the GDP change rate) are the main variables responsible for the sovereign bond yields in all the countries analyzed, both core and peripheral. In contrast, the bond yields do not seem to be intensively influenced by global indicators over the whole sampling period.

Full Text:



Copyright (c) 2018 Hazar Alt?nba?, Vincenzo Pacelli, Edgardo Sica

License URL:

International Journal of Economics and Finance  ISSN  1916-971X (Print) ISSN  1916-9728 (Online)  Email:

Copyright © Canadian Center of Science and Education

To make sure that you can receive messages from us, please add the '' domain to your e-mail 'safe list'. If you do not receive e-mail in your 'inbox', check your 'bulk mail' or 'junk mail' folders.