This working paper studies the convergence process in financial markets and its relation with the business cycle in 15 economies of the European Union. We use unobserved component models and a regression model. The regression model defines convergence as the discrepancy between two variables conveniently defined. The considered variables are the interest rates of the public debt (ten-year rates, in nominal and real terms), the slope of the term structure (ten-year minus three months) and the rates of return in the stockmarket.

We find a convergence process for the interest rates and the term spread before the third quarter of 1998. After this, there is integration in the ten-year nominal rates and the term spread, but not in the real rates; they evolve in a band with constant dispersion. The rates of return in the stock market do not integrate, though they move within a band of constant variance. The GDP in the studied countries only has a positive influence over the convergence process for the nominal rates.