Term Structure Analysis of the Relationship Between the Quotations of Government Bonds and Credit Default Swaps on the Example of Countries in the Eurozone

In this study we investigated the term structure uotations of government bonds and the structure of credit-default swaps based on 7 Eurozone countries in the period from late 2008 to early 2016. Two important results were obtained with Zivot-Andrews test and Perron test(1997), checking the presence of a structural break, and Granger test implemented by Toda-Yamamoto procedure. Firstly, it was revealed the presence of the shock caused by the establishment of restrictions on free trade in sovereign credit default swaps. Moreover, this restriction led to a strong enough complicate communication between bonds and credit-default swaps.Second, the shock is reflected most clearly in the short-term bonds and CDS developed and peripheral countries, respectively. This fact underlines the need to consider the entire the entire term structure of credit default swaps and bonds, and not only the most liquid and popular.