Intraday dynamics of euro area sovereign CDS and bonds

The recent sovereign debt crisis in the euro area has seen credit spreads on sovereign bonds and credit default swaps (CDS) surge for a number of member states. While these events have increased interest in understanding the dynamics of sovereign spreads in bond and CDS markets, there is little agreement in the literature as to whether one of the two markets is more important than the other in terms of price discovery of sovereign credit risk.

JEL classification: G12, G14 and G15

Keywords: Sovereign credit risk, credit default swaps, price discovery, intraday