In this thesis, we analyze government bond yields using the Principal Component Analysis (PCA) method and aim to understand the dynamics of factors present in global capital markets. Our goal is to identify common patterns and relationships between different government bonds and to pinpoint the main global, regional, and local factors that influence yield movements over the past ten years. Through the decomposition of yields using regression models, we examine the driving factors of the post-pandemic period characterized by tightened monetary policy and changing economic conditions on a global scale. For the purpose of implementing monetary policy in the Eurosystem and ensuring its effective transmission, we also examine periods when the markets of Eurosystem member states moved in unison, periods when they moved more independently, and times when the connection was limited to a specific region. To this end, we construct a measure that helps track this connectivity or fragmentation over time and assess the presence of systemic or idiosyncratic risk.
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