In particular, government bond yield spreads seem to be higher in those Member States regarded as particularly vulnerable in the current environment. Among the relevant factors are current fiscal imbalances, but also external imbalances, and they could ultimately have repercussions on the general government budget. Past fiscal behaviour may also play a role.
Rising long-term government bond yields may only have a gradual impact on government borrowing costs, as changes in interest rates only affect the cost of newly issued debt and debt at variable interest rates. However, they may signal both a reduced willingness on the part of investors to provide long-term funding as well as difficulty in accessing capital market funds.