By: The Quinnipiac University Economics Research Team, Niamh Savage
Source: Eurostat and own calculations. Daily EMU convergence criterion bond yields (i.e., central government 10-year bond yields)
Throughout this time period, many of the regional interest rates declined. Slovakia had the greatest variation, in percentage terms. Slovakia (pink line) had a large increase in interest rates at the beginning of the period, and their interest rates decreased after September 25th. It’s important to note that although this is a big percentage change in Slovakia’s rate – which is driven by the Eurozone as the only Euro monetary country in our V4+Romania grouping – it’s still a small change in basis point terms as discussed below.
Czechia, Hungary, and Poland showed a decline in interest rates. The Romanian Leu (yellow line) showed an increase in interest rates, but it is seemingly less significant than the increase by Slovakia.
Source: Eurostat and own calculations. Daily EMU convergence criterion bond yields (i.e., central government 10-year bond yields). The center line is a rolling three-month average. The upper and lower boundaries are the average plus and average minus one standard deviation, respectively, for the same three-month period.
Throughout this time period, most of the returns stayed within their historical range. The returns in all countries did show a slight decline, suggesting an increase in demand for their bonds and increase in prices. Romania, Czech, and Slovakia did, however, end the period with a slight incline of interest rates.
As discussed above, while the index revealed a large swing in the Slovakian rate, it is clear that it still didn’t change by one standard deviation. In particular, it started on September 18th at -0.23, fell to a low of -0.38 by September 25th and rose again to end at -0.24 by October 2nd. In percentage change terms, of course, a movement from -0.38 to -0.24 was a 36% rise. When rates are so close to zero, small basis point movements are large percentage changes.