Market sentiment as driver of euro area sovereign bonds 10-Year term premium

Sammanfattning

This paper investigates the relationship between market sentiment proxies and innovations in the 10-year term premium of Germany, France, Italy, and Spain. The analysis uses quarterly term premium estimates for the period 2000-2025 from Favero and Srivastava (2023) and five market sentiment proxies, examined within two empirical frameworks: country-by-country multivariate regressions and panel regressions. The results provide limited evidence that market sentiment systematically influences euro-area government bond term premiums, with statistical significance emerging only for specific sentiment proxies and in particular geographical areas of the euro area.