| Abstract [eng] |
The main purpose of this master thesis is to determine the impact of European Central Bank’s monetary policy on Baltic government bond yields. The work consists of three main parts: the analysis of literature, the research and its results, conclusion and recommendations. In the literature analysis, the main factors determining the yield of government securities are identified: shadow rate, macroeconomic environment, geopolitical situation, and specific risk premiums (liquidity, credit and inflation). It is also theoretically justified that in a zero lower bound environment, standard interest rates become insufficient for assessing the actions of the central bank. In the methodological part, a two-stage research model is formed. The event study method is applied to assess the reaction of markets in the short term. A linear regression model was developed to identify long-term relationships, in which the shadow rate is used as an independent variable to avoid the zero interest rate problem, systemic risk is assessed using the New SovCISS index, and Harmonized Index of Consumer Prices for inflation. Event analysis showed that during periods of financial stress, the market reaction was anomalous – interest rate cuts did not always reduce yields due to increased risk premiums. However, in the most recent period, the Baltic markets have demonstrated high efficiency, immediately pricing in ECB interest rate hikes. Regression analysis revealed a marked regional asymmetry: Lithuanian bond yields are the most sensitive to ECB policy and monetary policy, the Latvian bond yields show greater inertia and a delayed reaction. Estonia stands out as unique – its government bond yields, excluding base interest rates, are statistically significantly affected by systemic euro area risk (New SovCISS indicator), which indicates greater sensitivity to geopolitical uncertainty. |
