Political Uncertainty and Sovereign Bond Spreads: Evidence from Romania’s 2025 Presidential Election

The government bond market has a central role in the financial sustainability of public debt and in influencing investors’ perceptions of sovereign risk. In periods of political or economic uncertainty, bond yields can incorporate not only macroeconomic fundamentals but also political drivers capable of changing expectations about future policies. This paper studies the impact of Romania’s 2025 presidential election on the yield spread between Romanian ten-year government bonds and German benchmark bonds. The strategy of the paper uses an event-study approach to identify abnormal spread movements around the election rounds, with an OLS regression that separates the anticipatory behavior of investors from postelectoral adjustment while accounting for global risk sentiment and domestic credit conditions. The results show a significant widening of spreads after the first electoral round and a narrowing after the second round. The results show that uncertainty in the financial market increased after the first round and that the second round contributed to its resolution. Regression evidence confirms the direction of these effects, although statistical precision declines once robust inference is applied. The paper extends the existing literature by providing evidence from Romania, an emerging European Union country, and by exploiting the two rounds of the 2025 presidential election.