This Research Insight examines the impact of the unfolding European sovereign debt crisis, focusing on Greece, Portugal, Ireland, Spain, and Italy (GPISI). We use the new, short-horizon Barra Integrated Model (BIM Daily) to measure sovereign bond investment risk and provide insight into this market development. First, we highlight the background of this emerging crisis, in particular the links to government debt, fiscal deficits, maturity distribution, and levels of external borrowing. Then, we show how the recent volatility in European sovereign debt markets was reflected in BIM risk forecasts and led to high risk concentrations in a European government bond portfolio. Finally, we provide an historical and qualitative perspective to evaluate the potential widening of credit contagion.
Publication: MSCI Research Insight
Authors: ANAND Iyer, RUBAN Oleg, VANNEREM Philippe
