A Theory on European Bond Market Turmoil - New Solutions Suggested for Sovereign Bond Market in a Eurozone Under Stress.
“In a currency union, the financial markets can sometimes be blind to default risks carried by individual countries”, explain Professor Bodo Herzog and Johannes Müller in the latest White Paper from the Global Financial Institute at Deutsche Asset & Wealth Management. “As a result, the bond markets are more susceptible to liquidity and solvency crises than in countries outside the currency union. This can lead to macro-economic instability as well as the formation of bubbles.”