Determinants of municipal loan spreads: empirical evidence from Switzerland

Abstract

"This is the first study to investigate the determinants of risk premia paid by Swiss municipalities in the German-speaking part of Switzerland. This paper draws on a unique data set for Swiss municipalities collected during four surveys. Our results showthat fiscal soundness has almost no impact on risk premia and that the introduction of a no-bailout policy did not result in higher spreads. On the other hand, investors’ general risk aversion, as well as interest rate levels, are strongly related to spread levels."