First Release of Daily Euro Area Government Bond Yield Curves
The European Central Bank (ECB) is today publishing for the first time yield curves estimated from euro area central government debt securities denominated in euro.
From now on, the ECB will release every working day a set of nominal yield curves based on AAA-rated euro-denominated bonds issued by euro area central governments, covering the maturity spectrum from three months up to 30 years. In addition, euro area yield curves covering all euro area central government bonds and the spreads between both curves will be released. The yield curves, both past and present, can be accessed via an interactive ECB webpage.
A yield curve represents the relationship between the market remuneration rate (based on the interest rate and the market price) and the remaining time to maturity of bonds with a similar risk profile, at a certain moment. It is also known as the term structure of interest rates. The euro area yield curves use Svensson’s extension of the Nelson-Siegel model; the model parameters are also released daily. Since AAA-rated central government bonds are considered to reflect the lowest credit default risk, a yield curve computed on the basis of these bonds provides a floor for the borrowing costs in the euro area and thereby constitutes a useful benchmark for assessing the capital markets’ remuneration rates for other types of bonds with the same residual maturities. The euro area yield curves can also assist in gauging market expectations of economic and financial activity over a medium to long-term horizon. Moreover, they provide valuable information for financial market analyses and for financial stability purposes, for instance because they provide an indication of the path of future financing costs and their possible implications for the financial system. The ECB yield curves will also serve as a reference for other international and European institutions, such as the European Commission.
The yield curves are based on a selection of the most liquid and representative euro area central government bonds. They reflect the end-of-day market prices of the previous business day. At present, approximately 160 and 265 government bonds are used, respectively, to calculate the euro area “AAA” and “all” yield curves.
Currently, the euro area yield curves are relatively flat because of the small differences between the market remuneration rates for long-term and short-term government bonds in the euro area.
In recent months, the upward slopes of the central government bond yield curves have steepened somewhat because long-term government bond yields have increased more than short-term government bond yields. For example, concerning the “AAA” curve, yesterday’s closing yield for government bonds with a 10-year and 30-year maturity equalled 4.62% and 4.77%, respectively, which was 71and 69 basis points higher than on 29 December 2006. Over the same period, the yield of a government bond with a remaining time to maturity of three months has increased by 49 basis points, from 3.44% to 3.93%. So, the main slope of today’s yield curve, which is the difference between the yield on a bond with a 10-year maturity and that of a bond with a three-month maturity, equals 69 basis points, while it was 47 basis points at the end of last year.
The spread between today’s “AAA” euro area and “All” euro area yield curves equals 5 basis points for the 10-year maturity and 12 basis points for the 30-year maturity.
The euro area yield curves will be published on the ECB’s website every TARGET working day at 12 noon (Central European Time or Central European Summer Time, respectively). Yield curves are available from 29 December 2006 onwards.
The yield curves and a description of the methodology used to estimate them can be found on the ECB’s website at http://www.ecb.europa.eu/stats/money/yc/html/index.en.html.