Economic policy uncertainty and borrowing cost nexus
In addition to potentially impacting the equity market, uncertainty about future
economic and monetary policy actions may affect bond markets. On this front,
potential transmissions to financing conditions via higher corporate bond
spreads are of particular importance in terms of real economy implications.
During episodes of high EPU, for example, market lenders may demand a
higher uncertainty premium for corporate bond investments and yields may rise.
EU Forecast
euf:ba18.d:18/nws-01