2 Title: The Sovereign CDS-Bond Basis. From a Crisis Perspective.

Abstract: This work studies the determinants of the sovereign CDS-bond basis distortions, in the Euro area, during the last crises period. Regression analysis showed four relevant conclusions. Credit rating and credit outlook downgrades have a huge impact on the sovereign credit instruments premiums, although not originating arbitrage opportunities. Moreover, the ECB rate has a smoother effect on the sovereign debt markets ’ functioning and the risk-transfer balance between the state and the financial sector seems to have shifted from one crisis period to the other. Finally, markets ’ liquidity is the most powerful force in driving arbitrage opportunities in the sovereign debt market