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I can't find the source, either on the the ECB homepage or any other internet source to verify why German bonds are used as a reference point in the eurozone when talking about risk spreads for other European bonds.

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German bonds placed as a reference in the eurozone is a form of tacit understanding and i don't think you will find official conventions about this. This practice comes from market Finance pricing technics, as the CAPM, which use a risk (-free-rate) referential to price different kind of assets. Given the higly positive trade balance of Germany, the stability of its revenue base, etc... the country is seen by financing markets as higly creditworthy, i.e. viewed as the "most risk-free" of the eurozone.

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  • $\begingroup$ Any question @Nox ? $\endgroup$ – keepAlive Oct 17 at 11:39
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  • Germany is the largest Eurozone economy.
  • Most of the time German government bonds has lower interest rates than other large economies such as France or Italy or Spain.
  • Germany has a liquid bond market, facilitating its use as a benchmark.
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