European Central Bank - eurosystem
European Central Bank - eurosystem
Search
Search Options
Home Media Explainers Research & Publications Statistics Monetary Policy The €uro Payments & Markets Careers
Suggestions
Sort by

Pablo Serrano Ascandoni

22 November 2023
FINANCIAL STABILITY REVIEW - BOX
Sovereign bond markets and financial stability: examining the risk to absorption capacity
Financial Stability Review Issue 2, 2023
English
Details
Abstract
The smooth absorption of sovereign debt issuance by the financial sector is essential for financial stability. Newly issued government debt has been absorbed smoothly so far in 2023, despite the absence of net central bank purchases. Sovereign debt absorption patterns have been in line with empirical evidence, which suggests that investors tend to increase their bond purchases when yields rise. Non-bank investors tend to absorb less issuance in times of elevated financial market uncertainty, while accounting and leverage requirements influence the absorption capacity of banks. Higher government funding needs, especially in an environment of high market volatility, can imply rising yield levels and spreads.
JEL Code
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G15 : Financial Economics→General Financial Markets→International Financial Markets
H63 : Public Economics→National Budget, Deficit, and Debt→Debt, Debt Management, Sovereign Debt
31 May 2023
FINANCIAL STABILITY REVIEW - BOX
Corporate vulnerabilities and the risks of lower growth and higher rates
Financial Stability Review Issue 1, 2023
English
Details
Abstract
Following a strong post-pandemic recovery in profits, euro area non-financial corporations (NFCs) are now facing the risk of stagnating economic activity combined with tightening financial conditions. NFC vulnerabilities might increase as higher interest rates start to weigh on the ability of firms to cover their interest expenses, with highly indebted firms being particularly affected. This box shows that the share of vulnerable loans has been increasing since the second half of 2022 as financial conditions tighten, with those sectors of the economy that were impacted the most by the pandemic being significantly more affected than others. It also finds that higher interest rates could increase corporate vulnerabilities during periods of low or negative economic growth, while there is no statistically significant impact of higher rates on firms’ health during periods of economic expansion.
JEL Code
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G33 : Financial Economics→Corporate Finance and Governance→Bankruptcy, Liquidation
H32 : Public Economics→Fiscal Policies and Behavior of Economic Agents→Firm