WHAT MOVES SOVEREIGN BOND MARKETS? THE EFFECT OF MACROECONOMIC INDICATORS AND BUSINESS SENTIMENT ON GERMANY BOND YIELDS

Numerous economic information and economic indicators influence the movement of the financial market and are certainly sustained by the movement of government bond yields. Previous research has confirmed the impact of economic indices on yield trends and examines whether and to what extent economic indicators such as monetary policy measures, inflation, unemployment, oil prices, confidence indicators and stock markets affect the movement of yields on government German bonds. The focus was on two-year, five-year and ten-year German bonds. The research tests several hypotheses that claim that certain economic indicators: inflation in the EMU, oil prices, Sentix confidence index, stock market affect the movement of German yields. The results show that the observed factors have a more or less pronounced impact on the observed yields and that, as such, they should be used and analyzed when monitoring yield trends in the EMU market. Yields on government bonds are strongly influenced by numerous macro data, but also trust data, which is also shown in this research. It is clear that the factors analyzed in this research (inflation, monetary policy measures, stock market, oil and confidence) have a greater or lesser impact on yield trends and should certainly always be monitored when analyzing yields. However, it is noted that the observed factors will not always have the same impact. Macroeconomic factors, especially inflation, have different effects on longer and shorter yields. Statistically significant impact on all yields, regardless of whether they are biennial, five-year or ten-year, has monetary policy measures observed through the deposit facility, confidence index and stock market.