We develop an empirical model of heterogeneous agents to study the dynamics of the European sovereign bonds market. Agents make use of different information from the CDS market and the historical price movements of the sovereign bonds for their trading decisions. Subject to the perceived risk,...

Previous work has documented a greater sensitivity of long-term government bond yields to fundamentals in Euro area stress countries during the euro crisis, but we know little about the driver(s) of regime-switches. Our estimates based on a panel smooth threshold regression model quantify and...