FRANKFURT (MNI) – Eurozone government bond market tensions are not
driven by speculative trade with credit default swaps (CDS), the
Bundesbank said in its Monthly Bulletin on Monday.

The report noted that CDS have been blamed in the public debate for
exacerbating or even causing the recent spiraling of spreads between
German debt yields and those of Eurozone peripheral countries.

“If this were the case, the CDS market would have to influence risk
premia on bonds markets significantly and largely independently of
fundamental factors,” the central bank said.

In fact, however, observed developments of CDS market premia can be
correlated to country specific developments at each time, the report

“Altogether, this appears to argue against exaggerations on the
markets, be they driven by speculation or irrational risk aversion,” the
Bundesbank said.

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