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A high-frequency analysis of return and volatility spillovers in the European sovereign bond market

Using high-frequency data from the MTS trading platform, we examine return and volatility spillover effects across different maturities in the European sovereign bond market over tranquil and crisis periods. The longer-term benchmark securities of core countries are the largest net volatility transmitters, whereas the shorter-term benchmarks of periphery countries are the leading net receivers of volatility shocks. Moreover, the short-end and the long-end of the yield curve in both regions emerge as the sole net recipients of return spillovers. We note that bonds of periphery countries become volatility spillover transmitters during important macroeconomic events such as credit rating downgrades and financial assistance packages to financially distressed countries.