Yield premium (also referred to as interest rate premium and risk premium) of – bonds (of companies) with default risk compared with lower-risk bonds (government bonds with top credit ratings, i.e. securities of countries which, in the opinion of investors, are able and willing to repay the loans they have taken out) of the same maturity; the premium compensates the investor for the increased risk, and often also for the lower liquidity of such bonds; – government bonds of different countries in a currency area such as the euro area. The considerable risk premiums for securities issued by Greece, Italy, Ireland and Portugal at the beginning of 2010 reflected investors‘ fears of a breakup of the European Monetary Union (euro zone’s breakup) and the possible exit of individual highly indebted members that are incapable of reform. – See Ekart, Euro Bonds, Emergency Liquidity Assistance, Plan C, Repatriation Effect, Sovereign Default, Sovereign Debt, Effects. – Cf. ECB Monthly Bulletin, July 2009, pp. 31 ff. (yield spreads during the financial crisis; comparison of euro area to U.S.; overviews), BaFin Annual Report 2009, pp. 15 f. (CDS spreads for Greece 2008 to 2010), pp. 164 f. (BaFin examination).

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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