A nonparametric model for analysis of the EURO bond market

Abstract

The goal of this paper is to analyse by statistical methods the positions of individual countries within the EURO bond market. To this purpose we assume that each of the individual yield curves equals the sum of a common effect curve and of a country-specific one, interpreted as a spread. This allows to analyse the position of the countries by a two-stage nonparametric regression model. In addition, we provide a nonparametric bootstrap test. Both the estimated regression curves and the test indicate significant differences among European Monetary Union countries. A method for quantification of these differences is designed.