HIGH YIELDS: THE SPREAD ON GERMAN INTEREST RATES.

The article evaluates the interest rate differentials on government bonds in Europe, focusing on those in Italy, Spain, Sweden and Germany. As a result of globalization and of the rapid growth of public debt in many countries, the market for government bonds has become the most important segment of international financial markets. More than ever before, yield differentials between government bonds issued by different states express the assessment and the sentiment of market participants regarding a country's short- and long-term financial prospects, they reflect the markets' appraisal of fiscal and monetary policies, are immediately affected by news and are carefully watched in the search for arbitrage opportunities. In Europe, the reference yield spreads are those of annualized interest rates on 10-year benchmark bonds with respect to Germany, German yields have been and are the lowest on all maturities and German bonds provide the yardstick of a risk-free asset.