Sovereign bond market  Government bond markets have suffered during the ongoing banking crisis, especially as it turned into a sovereign debt crisis. They are no longer considered a homogeneous, risk-free asset class. Investors’ willingness to take risk diminished sharply. Volatility and liquidity became the most important topics for market participants.
Bond buyers exercised greater scrutiny and a series of rating downgrades prompted investors to re-evaluate their belief that European  BIS central bankers’ speeches  5  government bonds are risk-free assets. This led to a differentiated perception of European government bonds and diverging yields for the individual countries. To a certain degree, the increased spreads seem to be justified.