Higher interest rates attract investors to euro area sovereign debt but pose challenges for public finances | European Stability Mechanism

Higher interest rates attract investors to euro area sovereign debt but pose challenges for public finances | European Stability Mechanism

 

The recent increase in interest rates has changed the landscape of euro area government debt. While governments must pay higher borrowing rates to finance their deficits, higher bond yields attract investors. Looking at the origin of the new demand for government debt, we ask if this will endure and what the implications of higher borrowing costs are for sovereigns.  (...)