Bank of Lithuania
5222_4c31f61d7ec71ec40c53cce0204d363c.png
2020-06-01

Relevance of Sovereign Bond Valuations Topic in the Speeches of ECB Officials

5222_4c31f61d7ec71ec40c53cce0204d363c.png
0

The aim of this paper is to assess how relevant is the topic of sovereign bond valuations in official ECB Executive Board member speeches and, in particular, under what circumstances do ECB officials begin communicating the driving factors of sovereign bond pricing. For this purpose, we downloaded over 2000 public ECB Executive Board member speeches and applied various text mining techniques. The visual analysis revealed that the importance of the topic of sovereign bond pricing and related risk factors in ECB officials’ speeches has greatly fluctuated over time. The main structural break points were linked to the financial market turbulences, but this topic, possibly due to the introduction of sovereign bond purchases, remained relatively popular even after stress episodes. The linkages between the publicly communicated terms of sovereign bond pricing and related risk factors were rather complex and change in respect to the market situation. Meanwhile, the sentiment balance of the credit risk factor was usually on the negative side, while the ones of other terms were much more neutral.

JEL Codes: C80, E43, E58, G12.

The views expressed are those of the author(s) and do not necessarily represent those of the Bank of Lithuania.

ECB Executive Board, speeches, sovereign bonds, risk factors, correspondence analysis, sentiment analysis