The sovereign bond yields of the Eurozone, or more correctly the euro area, have since the introduction of the Euro undergone a bond yield compression. However, as can be seen in table 1, these bond yields started to diverge considerably around mid 2008 following the recent financial crisis and increased sovereign risk. Yields on Greek, Irish, and Portuguese bond have diverged the most from for example German bonds. Based upon this and the ongoing economic integration within the EU and Eurozone, proposals for a common Eurozone bond have been raised. There are many pros and cons with such a proposal. The pros and cons are dependent upon how such a proposal is designed and which factors are considered, i.e. economic and political. Based upon the recent development and discussions, this paper explores a potential common Eurozone bond from a financial and economic point of view.
Sumitted Autumn 2010 as the Final Project for FN699 "Current Issues in Finance: Financial Crisis and Risk Management", taught by Dr. Lucjan T. Orlowski, Sacred Heart University John F. Welch College of Business, Luxembourg Campus
Welin, Erik, "A Common Eurozone Bond" (2010). WCOB Student Papers. 3.