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Journal articles on the topic 'Sovereign bond spreads'

Author: Grafiati

Published: 4 June 2021

Last updated: 15 February 2022

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1

Erlwein-Sayer, Christina. "Macroeconomic News Sentiment: Enhanced Risk Assessment for Sovereign Bonds." Risks 6, no. 4 (December 7, 2018): 141. http://dx.doi.org/10.3390/risks6040141.

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We enhance the modelling and risk assessment of sovereign bond spreads by taking into account quantitative information gained from macro-economic news sentiment. We investigate sovereign bonds spreads of five European countries and improve the prediction of spread changes by incorporating news sentiment from relevant entities and macro-economic topics. In particular, we create daily news sentiment series from sentiment scores as well as positive and negative news volume and investigate their effects on yield spreads and spread volatility. We conduct a correlation and rolling correlation analysis between sovereign bond spreads and accumulated sentiment series and analyse changing correlation patterns over time. Market regimes are detected through correlation series and the impact of news sentiment on sovereign bonds in different market circumstances is investigated. We find best-suited external variables for forecasts in an ARIMAX model set-up. Error measures for forecasts of spread changes and volatility proxies are improved when sentiment is considered. These findings are then utilised to monitor sovereign bonds from European countries and detect changing risks through time.

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2

Thazhugal Govindan Nair, Saji. "Sovereign credit ratings and bond yield spreads in emerging markets." Journal of Financial Economic Policy 12, no. 2 (November 25, 2019): 263–77. http://dx.doi.org/10.1108/jfep-04-2019-0068.

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Purpose This paper, using the model suggested by Cantor and Pecker (1996), aims to explore the relations between sovereign ratings and bond yield spreads in emerging markets. Design/methodology/approach The ordinary least square regression procedure administered on the most recent sovereign ratings of 46 countries demonstrates how the macroeconomic information embody in the sovereign rating scores predict their bond yield spreads relative to the yield on US Treasury bond. Findings The research finds that the assigned rating scores do not herald the complete elites of the macroeconomic conditions in emerging markets, and there is more incremental information in the publicly available macroeconomic variables, which is much useful in predicting bond yield spreads than that embedded into the sovereign ratings. Practical implications The outcomes of the research have strategic implications for global investors and policymakers. The use of credit rating scores along with the macroeconomic fundamentals in emerging economies produces better predictions than the benchmark predictions solely based on the rating scores suggested by the previous research. Originality/value This study is the first one to address the issues related to sovereign ratings and bond yield spread in developing and emerging markets using the most recent ratings during the period of the economic recoveries, following the global financial crisis of 2008.

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3

Jeanneret, Alexandre. "The Dynamics of Sovereign Credit Risk." Journal of Financial and Quantitative Analysis 50, no. 5 (October 2015): 963–85. http://dx.doi.org/10.1017/s002210901500040x.

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AbstractThis article proposes a structural model for sovereign credit risk with endogenous sovereign debt and default policies. A maximum-likelihood estimation of the model with local stock market prices generates daily model-implied sovereign spreads. This approach explains two-thirds of the daily variation in observed sovereign spreads for emerging and European economies over the 2000–2011 period. Global factors help to further explain the time variation in sovereign credit risk. In particular, sovereign spreads in emerging markets vary with U.S. market uncertainty, whereas European spreads depend on Euro-zone bond factors.

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4

Juodžiukynienė, Greta. "The significance of country-specific and common risk factors for CEE government bond spreads changes." Ekonomika 95, no. 1 (April 12, 2016): 84–111. http://dx.doi.org/10.15388/ekon.2016.1.9908.

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This paper provides an empirical assessment of the relationship between common European Union and country-specific risk factors of sovereign bond spreads for Central and Eastern European countries over the period of 2004-2014. The model, estimated using Pooled Mean Group techniques, that accounts for both common long-run determinants and cross-country heterogeneities in sovereign bond spreads, tends to suggest that country-specific and common factors are important in the long-run, but common European Union factors are the main determinants of bond spreads in the short-run, i.e., market volatility index series converges with changes of sovereign bond spreads and turns out to be the predominant factor in the short-run. Furthermore, countries with stronger fundamentals have a tendency for lower responsiveness to changes in global risk aversion.The decomposition of changes in spreads for the purpose to compare actual and estimated spreads specifies that during risk-on periods (when the increase of misalignment falls down) there is consistency for increasing of creditworthiness undervaluation.

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5

Docherty, Paul, and Steve Easton. "State-varying illiquidity risk in sovereign bond spreads." Pacific-Basin Finance Journal 50 (September 2018): 235–48. http://dx.doi.org/10.1016/j.pacfin.2016.11.003.

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6

Eichler, Stefan. "The political determinants of sovereign bond yield spreads." Journal of International Money and Finance 46 (September 2014): 82–103. http://dx.doi.org/10.1016/j.jimonfin.2014.04.003.

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7

Pouzo, Demian, and Ignacio Presno. "Sovereign Default Risk and Uncertainty Premia." American Economic Journal: Macroeconomics 8, no. 3 (July 1, 2016): 230–66. http://dx.doi.org/10.1257/mac.20140337.

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This paper studies how international investors' concerns about model misspecification affect sovereign bond spreads. We develop a general equilibrium model of sovereign debt with endogenous default wherein investors fear that the probability model of the underlying state of the borrowing economy is misspecified. Consequently, investors demand higher returns on their bond holdings to compensate for the default risk in the context of uncertainty. In contrast with the existing literature on sovereign default, we match the bond spreads dynamics observed in the data together with other business cycle features for Argentina, while preserving the default frequency at historical low levels. (JEL E43, E44, F34, G12, G21, H63, O16)

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8

Liu, Sha. "The Impact of Textual Sentiment on Sovereign Bond Yield Spreads: Evidence from the Eurozone Crisis." Multinational Finance Journal 18, no. 3/4 (December 1, 2014): 215–48. http://dx.doi.org/10.17578/18-3/4-2.

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9

Comelli, Fabio. "Emerging Market Sovereign Bond Spreads: Estimation and Back-testing." IMF Working Papers 12, no. 212 (2012): 1. http://dx.doi.org/10.5089/9781475505627.001.

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10

Georgoutsos, Dimitris A., and Petros M. Migiakis. "European sovereign bond spreads: financial integration and market conditions." Applied Financial Economics 23, no. 20 (October 2013): 1609–21. http://dx.doi.org/10.1080/09603107.2013.842637.

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11

Durbin, Erik, and David Ng. "The sovereign ceiling and emerging market corporate bond spreads." Journal of International Money and Finance 24, no. 4 (June 2005): 631–49. http://dx.doi.org/10.1016/j.jimonfin.2005.03.005.

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12

Bernoth, Kerstin, and Burcu Erdogan. "Sovereign bond yield spreads: A time-varying coefficient approach." Journal of International Money and Finance 31, no. 3 (April 2012): 639–56. http://dx.doi.org/10.1016/j.jimonfin.2011.10.006.

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13

Comelli, Fabio. "Emerging market sovereign bond spreads: Estimation and back-testing." Emerging Markets Review 13, no. 4 (December 2012): 598–625. http://dx.doi.org/10.1016/j.ememar.2012.09.002.

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14

Gyódi, Kristóf. "Determinants of CEE government bond spreads and contagion between 2001–2014." Acta Oeconomica 67, no. 2 (June 2017): 235–56. http://dx.doi.org/10.1556/032.2017.67.2.5.

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This paper analyses the pricing of sovereign risk and contagion during the crises in the Central and Eastern European countries. Panel data are used to estimate the determinants of government bond spreads in three different time periods: before the crisis, during the global financial crisis, and during the European debt crisis. The econometric model includes interactions between the explanatory variables and the crisis dummies. This specification enables the coefficients to change during the crises. The empirical analysis confirms a statistically significant relationship between sovereign risk and macroeconomic fundamental variables. Additionally, the results suggest an increase in the importance of macroeconomic fundamentals during the financial crisis. The analysis also supports that sovereign credit ratings and exchange rate risk have a significant impact on government bond spreads.

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15

Sorrosal-Forradellas, M. Teresa, Lisana B. Martinez, and Antonio Terceño. "Are European sovereign bond spreads in concordance with macroeconomic variables evolution?" Kybernetes 46, no. 1 (January 9, 2017): 85–101. http://dx.doi.org/10.1108/k-06-2016-0121.

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Purpose The last great financial crisis which arose in the middle of 2007 in the USA produced contagion effects over others economies. The purpose of this paper is focused on analyzing the evolution of a set of economic variables of 17 European countries since 1991 until 2013. Sovereign bond spreads are also considered to compare the incidence of the financial crisis over the economies considering macroeconomics fundamentals and fixed bonds. Design/methodology/approach Self-organizing maps (SOMs) are used to achieve the purpose of the research. With this methodology, it is possible to analyze the evolution of the macroeconomic fundamentals of each country, obtaining particular and general conclusions according to the position of each country in the SOM. Moreover, the countries are compared between them and with its respective sovereign bond spreads level for each year of analysis. Findings The impact of the crisis is different between the countries was analyzed. Belonging to the European Monetary Union is an interesting characteristic of some of the most affect economies. Research limitations/implications This research presents wide implications for the economies to control the most vulnerable economic variables in front of financial crisis to prevent the contagion effect. The inclusion of more economic variables and countries could enhance the study. Originality/value This research analyzes the relationship between macroeconomic variables and sovereign bond spreads using an infrequent methodology. The results obtained are valuable because they highlight how the present crisis has differently affected the European countries.

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16

Jahjah, Samir, Bin Wei, and Vivian Z. Yue. "Exchange Rate Policy and Sovereign Bond Spreads in Developing Countries." International Finance Discussion Paper 2012, no. 1049 (June 2012): 1–36. http://dx.doi.org/10.17016/ifdp.2012.1049.

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17

Yue, Vivian Z., and Samir Jahjah. "Exchange Rate Policy and Sovereign Bond Spreads in Developing Countries." IMF Working Papers 04, no. 210 (2004): 1. http://dx.doi.org/10.5089/9781451874822.001.

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18

JAHJAH, SAMIR, BIN WEI, and VIVIAN ZHANWEI YUE. "Exchange Rate Policy and Sovereign Bond Spreads in Developing Countries." Journal of Money, Credit and Banking 45, no. 7 (September 9, 2013): 1275–300. http://dx.doi.org/10.1111/jmcb.12052.

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19

Zinna, Gabriele. "Identifying risks in emerging market sovereign and corporate bond spreads." Emerging Markets Review 20 (September 2014): 1–22. http://dx.doi.org/10.1016/j.ememar.2014.05.002.

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20

Morsy, Hanan, Eman Moustafa, Tiguene Nabassaga, and Mustafa Yenice. "Investor Herding and Spillovers in African Debt Markets." AEA Papers and Proceedings 111 (May 1, 2021): 607–10. http://dx.doi.org/10.1257/pandp.20211118.

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Using high-frequency data for sovereign long-term bond yields and five-year credit default swap spreads, we estimate a regression model to identify a nonlinear link between cross-section deviation of market yield and extreme movements in African markets and other regions. Results indicate that African sovereign bonds have been subject to herding. International investors tend to lump African sovereign bonds into one asset class, pricing risk based on regional market performance instead of individual countries' performance. More over, we find evidence of herding spillovers from other regions. Africa is the most vulnerable of developing regions to shifts in market sentiment.

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21

Drenovak, Mikica, and Branko Urosevic. "Exchange-traded funds of the eurozone sovereign debt." Ekonomski anali 55, no. 187 (2010): 31–60. http://dx.doi.org/10.2298/eka1087031d.

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Periods of high uncertainty bring liquidity concerns to the forefront for sovereign bond investors. Arguably the most liquid and cost-effective way for retail and small institutional investors to gain diversified sovereign bond exposure is through an exchange traded fund (ETF). In this paper we study the performance, country exposure, and replicating characteristics of a sample of 31 European index ETFs with exposure to eurozone sovereign debt. The obtained results are presented in the context of underlying index selection rules, types of replication, and movements in sovereign debt interest rates and sovereign CDS spreads. It is demonstrated that the ETFs focused on accurately track corresponding bond indices. This is consistent with earlier findings for equity index ETFs. Our results may be of interest for institutional investors, regulators, and everyone interested in sovereign debt investments.

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22

Lukić, Velimir. "Integration of Government Bond Market in the Euro Area and Monetary Policy." Journal of Central Banking Theory and Practice 5, no. 1 (January 1, 2016): 71–97. http://dx.doi.org/10.1515/jcbtp-2016-0004.

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Abstract This paper combines analysis of evolution in euro area government bond market integration and interference of European Central Bank with functioning of respective market recently. Since the introduction of euro, government bond yields converged in the euro area, bonds of different countries have become close substitutes in the perception of investors, and overall integration of the market was rather high. At the end of 2008, dramatic shift occurred and ever since disintegrative forces were set in motion. The paper presents the following measures of integration of the government bond markets: yield spreads, dispersion in yield spreads and beta coefficient. All three measures suggest unprecedented market disintegration as of 2010. The paper highlighted relevance of sovereign bond market for the smooth functioning of the monetary policy transmission mechanism in a monetary union context. Three ECB’s programmes aimed at sovereign debt crisis resolution were analysed in details. They proved successful in lowering peripheral countries’ yields and spreads, and calming the markets. If one takes central bank function of the lender of last resort for banks, then these programmes may be viewed as the “buyer of last resort” device for government bonds. Although warranted by exceptional circumstances and need for swift response, a due caution should be paid to these programmes since they pose certain challenges for conduct of monetary policy and might even have unintended consequences.

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23

Tampakoudis, Ioannis A., Andrius Tamošiūnas, Demetres N. Subeniotis, and Ioannis G. Kroustalis. "THE INTERACTIONS AND TRADE-OFFS OF SOVEREIGN CREDIT DEFAULT SWAP (CDS) AND BOND SPREADS IN A DYNAMIC CONTEXT." Journal of Business Economics and Management 20, no. 3 (April 23, 2019): 466–88. http://dx.doi.org/10.3846/jbem.2019.9759.

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This study provides a dynamic analysis of the lead-lag relationship between sovereign Credit Default Swap (CDS) and bond spreads of the highly indebted southern European countries, considering an extensive time sample from the period before the global financial crisis to the latest developments of the sovereign indebtedness in the euro area. We employ an integrated price discovery methodology on a rolling sample, with the intention to shed light on whether the CDS spreads can trigger rises in bond spreads, and the relative efficiency of credit risk pricing in the CDS and bond markets. In addition, we attempt to depict the evolution of the price discovery process regarding the direction of influence from one market to the other. The rolling window analysis verifies that the price discovery process evolves over time, presenting frequent alternations concerning the leading market. We find that during periods of economic turbulence the CDS market leads the bond market in price discovery, incorporating the new information about sovereign credit risk faster and more efficiently than the bond market does. This regularity should be seriously considered by private and public participants as they make investment and funding decisions. Therefore, the motivation of our paper is to identify the dominant market in terms of price discovery during a period of economic turmoil and, thus, to provide insights for decision making to investment bodies and central governments.

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24

Rommerskirchen, Charlotte. "Foreign bond investors and market discipline." Competition & Change 24, no. 1 (September 5, 2019): 3–25. http://dx.doi.org/10.1177/1024529419872171.

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This article scrutinizes the impact of foreign bond ownership on market discipline, that is the mutual responsiveness of financial markets and sovereign borrowers. The empirical investigation covers 12 advanced economies during the Great Moderation (1981–2008). This article finds no evidence that foreign bond investors affect the sensitivity of bond spreads to fiscal policy. Reversely, results show that government responsiveness to market pressure is contingent on the make-up of its investor base. Bond spreads spur on fiscal consolidation. The larger the share of foreign bond investors, the bigger this effect.

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25

Proksová, Denisa, and Mária Bohdalová. "Bond Yield Spreads in the Eurozone." Annals of the Alexandru Ioan Cuza University - Economics 62, no. 2 (July 1, 2015): 222–40. http://dx.doi.org/10.1515/aicue-2015-0015.

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Abstract Euro Area sovereign bond yield spreads fell significantly after the creation of the monetary union and moved in unison until the recession of 2008, when investors’ risk pricing changed considerably. Rising bond yield spreads caught the attention of economists who tried to find the factors influencing their size. Evolution of bond spreads was mostly related to various macroeconomic factors as well as the soundness of the countries’ banking sectors and a general level of risk aversion in the financial markets. Analysis presented in this paper compares bond yield spreads of Euro Area member countries and relates them to their debt levels as well as the liquidity of the securities and a general level of risk aversion. Apart from the usual variables, we also analysed differences in purchasing power to assess the impact of the common monetary policy in the pre-crisis period. After adjusting the model to better explain movements of linear regression residuals, we could not prove a systematic assessment of the above-mentioned factors except for time periods of high market volatility. We explain sudden changes in the importance of idiosyncratic factors as consequences of policies of the European Central Bank and other European Union institutions following such time periods, which, as our analysis suggests, distorted pricing of risk in the markets.

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26

Heryan, Tomas, and Jan Ziegelbauer. "Volatility of yields of government bonds among GIIPS countries during the sovereign debt crisis in the euro area." Equilibrium 11, no. 1 (March 31, 2016): 61. http://dx.doi.org/10.12775/equil.2016.003.

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The aim of the paper is to estimate, how the volatility of yields of the Greek bonds affects yields’ volatilities of bonds in selected European countries during the period of the sovereign debt crisis in the euro area. We obtained data for 10-year bonds in a weekly frequency from January 2006 till the end of December 2014. To make a comparison of pre-crisis period, we firstly investigate a bond yields’ volatility before 15th September 2008, when U.S. Leman Brothers bankrupted and the global financial crisis had been reflected in full. However, the period of the global financial crisis could also negatively affect the development of government bonds. Therefore, the period after Leman Brothers’ bankruptcy has been excluded and our crisis period starts after 23rd April 2010, when Greece asked the IMF for financial help and the sovereign debt crisis had been reflected in full. Volatility models GARCH (1,1), IGARCH (1,1) and TARCH (1,1) were used as an estimation method. To examine the risk premium of all GIIPS economies (Greece, Ireland, Italy, Portugal and Spain), we also compared the whole investigation with the developments of each spread against the yields of German government bonds. Our results clearly proved not only big differences between pre-crisis and crisis period, but also differences in output with the bond yield spreads. It was concluded that there has been a higher impact of the Greek bond yields, as well as yield spreads volatility in 2010 and 2011, while it is on the lower level in pre-crisis period.

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27

Petrova, Iva, Michael G. Papaioannou, and Dimitri Bellas. "Determinants of Emerging Market Sovereign Bond Spreads: Fundamentals Vs Financial Stress." IMF Working Papers 10, no. 281 (2010): 1. http://dx.doi.org/10.5089/9781455210886.001.

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28

Özmen, Erdal, and Özge Doğanay Yaşar. "Emerging market sovereign bond spreads, credit ratings and global financial crisis." Economic Modelling 59 (December 2016): 93–101. http://dx.doi.org/10.1016/j.econmod.2016.06.014.

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29

Csontó, Balázs. "Emerging market sovereign bond spreads and shifts in global market sentiment." Emerging Markets Review 20 (September 2014): 58–74. http://dx.doi.org/10.1016/j.ememar.2014.05.003.

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30

Naifar, Nader. "What Explains the Sovereign Credit Default Swap Spreads Changes in the GCC Region?" Journal of Risk and Financial Management 13, no. 10 (October 16, 2020): 245. http://dx.doi.org/10.3390/jrfm13100245.

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This paper aimed to investigate the drivers of sovereign credit risk spreads changes in the case of four Gulf Cooperation Council (GCC) countries, namely Kingdom of Saudi Arabia (KSA), the United Arab Emirates (UAE), Qatar, and Bahrain. Specifically, we explained the changes in sovereign credit default swap (hereafter SCDS) spreads at different locations of the spread distributions by three categories of explanatory variables: global uncertainty factors, local financial variables, and global financial market variables. Using weekly data from 5 April 2013, to 17 January 2020, and the quantile regression model, empirical results indicate that the global factors outperform the local factors. The most significant variables for all SCDS spreads are the global financial uncertainty embedded in the Chicago Board Options Exchange (CBOE) volatility index (VIX) and the global conventional bond market uncertainty embedded in the Merrill Lynch Option Volatility Estimate (MOVE) index. Moreover, the MOVE index affects the various SCDS spreads only when the CDS markets are bullish. Interestingly, the SCDS spreads are not affected by the global economic policy and the gold market uncertainties. Additionally, a weak dependence is observed between oil prices and SCDS spreads. For the country-specific factors, stock market returns are the most significant variable and impact the SCDS spreads at different market circumstances.

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31

Tsuruta, Masaru. "Decomposing the term structures of local currency sovereign bond yields and sovereign credit default swap spreads." North American Journal of Economics and Finance 51 (January 2020): 101072. http://dx.doi.org/10.1016/j.najef.2019.101072.

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32

Petkov, Boris T. "Excessive Debt or Excess Savings -- Transition Countries Sovereign Bond Spread Assessment." International Business Research 10, no. 3 (February 10, 2017): 91. http://dx.doi.org/10.5539/ibr.v10n3p91.

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We study the sovereign yield spreads determinants in transition – Central and Eastern Europe (CEE) and Caucasus and Central Asia (CCA) -- countries and try to provide an answer to the key question: was the narrowing of the spreads and their compression a result of improvement of CEECCA countries sovereign’s macroeconomic policy (implemented in early to mid 2000s), or was it due to global excess liquidity provision? If better domestic macroeconomic policy efforts and solid reforms implemented in this period have led to: i) improvement in sovereign debt management e.g., by increasing the average debt portfolio duration and reducing the stock of FOREX debt; ii) development of domestic financial markets with enlargement of the investor’s base and enhancement of the risk management techniques; iii) continuing financial liberalization; iv) sustainable fiscal adjustment, reserve accumulation and price stability; and v) adoption of the most conductive to prosperity institutional structure, then it would be expected that any tighter monetary policy environment in the developed economies should have only a tiny effect on spreads.The models are estimated on an individual basis -- country by country -- using a framework allowing for fractionally integrated variables (ARDL) as well as, by utilising panel data (cross-sectional-time-series) estimation whenever data availability allows.We utilise daily data over the period 2006-2012 and quarterly data over the period 2002-2011. These are the periods for which meaningful comparable data are available for Bulgaria, Croatia, Hungary, Kazakhstan, Poland, Russia, Serbia, and Ukraine (in various combinations).We are careful not to attempt to split the sample into (say two) potential segments for comparison of “normal” versus “crises” period estimates (as customary) as since 2002 / 2003 the transition economies have started to experience the powerful financial effect generated by the excess global liquidity, i.e., the entire period under consideration is constituted by two phases characterised by: i) excess liquidity (2002-2008); and, ii) the Great Depression Mark II (2008 – to present).

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33

Tampakoudis, Ioannis A., Demetres N. Subeniotis, and Ioannis G. Kroustalis. "Greek sovereign credit market dynamics: Credit Default Swap and bond spreads' linkages." International Journal of Trade and Global Markets 5, no. 3/4 (2012): 268. http://dx.doi.org/10.1504/ijtgm.2012.049989.

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34

Capelle-Blancard, Gunther, Patricia Crifo, Marc-Arthur Diaye, Rim Oueghlissi, and Bert Scholtens. "Sovereign bond yield spreads and sustainability: An empirical analysis of OECD countries." Journal of Banking & Finance 98 (January 2019): 156–69. http://dx.doi.org/10.1016/j.jbankfin.2018.11.011.

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35

Antonakakis, Nikolaos, Christina Christou, Juncal Cunado, and Rangan Gupta. "Convergence patterns in sovereign bond yield spreads: Evidence from the Euro Area." Journal of International Financial Markets, Institutions and Money 49 (July 2017): 129–39. http://dx.doi.org/10.1016/j.intfin.2017.03.002.

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36

Izadi, Selma, and M. Kabir Hassan. "Impact of international and local conditions on sovereign bond spreads: International evidence." Borsa Istanbul Review 18, no. 1 (March 2018): 41–51. http://dx.doi.org/10.1016/j.bir.2017.08.002.

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37

Cruces, Juan J., and Christoph Trebesch. "Sovereign Defaults: The Price of Haircuts." American Economic Journal: Macroeconomics 5, no. 3 (July 1, 2013): 85–117. http://dx.doi.org/10.1257/mac.5.3.85.

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A main puzzle in the sovereign debt literature is that defaults have only minor effects on subsequent borrowing costs and access to credit. This paper comes to a different conclusion. We construct the first complete database of investor losses (“haircuts”) in all restructurings with foreign banks and bondholders from 1970 until 2010, covering 180 cases in 68 countries. We then show that restructurings involving higher haircuts are associated with significantly higher subsequent bond yield spreads and longer periods of capital market exclusion. The results cast doubt on the widespread belief that credit markets “forgive and forget.” (JEL E43, F34, G15, H63)

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38

Novy-Marx, Robert, and Joshua D. Rauh. "Fiscal Imbalances and Borrowing Costs: Evidence from State Investment Losses." American Economic Journal: Economic Policy 4, no. 2 (May 1, 2012): 182–213. http://dx.doi.org/10.1257/pol.4.2.182.

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During the last quarter of 2008, financial losses in state pension funds varied from 12 percent to 68 percent of the revenue generated by the state government. We quantify a sovereign default channel in the state municipal market by examining how changes in bond spreads vary with state pension fund losses, controlling for credit ratings and various measures of the state's fiscal strength. Municipal bond spreads rose by 7–15 basis points for each 10 percent of state-generated revenue lost by states in the lower half of the credit quality spectrum. (JEL H71, H72, H74, H75)

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39

Choi, Sangyup, and Yuko Hashimoto. "The Effects of Data Transparency Policy Reforms on Emerging Market Sovereign Bond Spreads." IMF Working Papers 17, no. 74 (2017): 1. http://dx.doi.org/10.5089/9781475589603.001.

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40

Arezki, Rabah, and Markus Bruckner. "Resource Windfalls and Emerging Market Sovereign Bond Spreads: The Role of Political Institutions." IMF Working Papers 10, no. 179 (2010): 1. http://dx.doi.org/10.5089/9781455202133.001.

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41

Arezki, Rabah, and Markus Brückner. "Resource Windfalls and Emerging Market Sovereign Bond Spreads: The Role of Political Institutions." World Bank Economic Review 26, no. 1 (May 18, 2011): 78–99. http://dx.doi.org/10.1093/wber/lhr015.

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42

Silvapulle, Param, Jean Pierre Fenech, Alice Thomas, and Rob Brooks. "Determinants of sovereign bond yield spreads and contagion in the peripheral EU countries." Economic Modelling 58 (November 2016): 83–92. http://dx.doi.org/10.1016/j.econmod.2016.05.015.

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43

D’Agostino, Antonello, and Michael Ehrmann. "The pricing of G7 sovereign bond spreads – The times, they are a-changin." Journal of Banking & Finance 47 (October 2014): 155–76. http://dx.doi.org/10.1016/j.jbankfin.2014.06.001.

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44

Margaretic, Paula, and Sébastien Pouget. "Sovereign bond spreads and extra-financial performance: An empirical analysis of emerging markets." International Review of Economics & Finance 58 (November 2018): 340–55. http://dx.doi.org/10.1016/j.iref.2018.04.005.

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Vu, Huong, Rasha Alsakka, and Owain ap Gwilym. "The credit signals that matter most for sovereign bond spreads with split rating." Journal of International Money and Finance 53 (May 2015): 174–91. http://dx.doi.org/10.1016/j.jimonfin.2015.01.005.

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Afonso, António, João Tovar Jalles, and Mina Kazemi. "The effects of macroeconomic, fiscal and monetary policy announcements on sovereign bond spreads." International Review of Law and Economics 63 (September 2020): 105924. http://dx.doi.org/10.1016/j.irle.2020.105924.

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Kaminsky, Graciela. "Emerging Markets and Financial Globalization Sovereign Bond Spreads in 1870–1913 and Today." Journal of International Economics 73, no. 1 (September 2007): 219–22. http://dx.doi.org/10.1016/j.jinteco.2007.06.002.

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Gomez-Bengoechea, Gonzalo, and Alfredo Arahuetes. "The importance of being earnest." Journal of Financial Economic Policy 11, no. 1 (April 1, 2019): 121–38. http://dx.doi.org/10.1108/jfep-02-2018-0026.

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Abstract:

Purpose This paper aims to provide an empirical analysis of the macroeconomic determinants of sovereign bond yield spreads in the Eurozone from 2000 until August 2012, when the Outright Monetary Transactions programme was launched. Design/methodology/approach The authors constructed an unbalanced panel with quarterly data from 2000 Q1 to 2012 Q2 for the 12 Eurozone countries: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Luxembourg, Italy, The Netherlands, Portugal and Spain. The authors propose a model that explains spreads through the main categories of variables observed in the literature. The relationship between variables is analysed using ordinary least squares and quantile regressions. As discussed by the authors, quantile regressions provide a more precise estimation, given the huge heterogeneity across counties that can be observed in the Eurozone. Findings Results show that the relationship between sovereign risk and macroeconomic fundamentals is affected by a strong country sentiment effect. The impact of country sentiment on sovereign risk is larger for those countries that were already experiencing higher spreads. Regardless the impact that European Central Bank’s (ECB) intervention had on sovereign risk from 2012, quantile regression results suggest that policy recommendations and goals should be adapted to each country’s market perception. Originality/value The results obtained improve on previous findings on this topic (De Grauwe and Ji, 2012) in two ways. First, they show that even introducing every category of determinants found in the literature in the main specification, fundamentals can only partially explain the evolution of sovereign risk in the Eurozone. Second, they find there is a country-sentiment effect that affects the relationship between macroeconomic indicators and sovereign risk. Furthermore, the paper finds that the country-sentiment effect is larger for countries facing high spreads.

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Kocsis, Zalán. "Global, regional, and country-specific components of financial market indicators." Acta Oeconomica 64, Supplement-1 (December 1, 2014): 81–110. http://dx.doi.org/10.1556/aoecon.64.2014.s1.3.

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This paper studies the global, regional, and country-specific components of four key financial market indicators: sovereign CDS spreads, equity indices, exchange rates, and EMBI Global bond spreads. In all four markets, the results support the findings of the literature of a significant global component, but also point out the importance of regional correlations. Variance decompositions point to roughly a third of variance explained by both global and country-specific components in each of the four analysed financial markets, although there is considerable cross-country heterogeneity in this respect. The global factors of indicators are correlated across asset classes, but the market- and country-specific components of indicators are still significantly large to suggest diversification benefits of both multi-asset and multi-country portfolios. An application of the factor model suggests that the link between Central Eastern European and Euro zone periphery markets is stronger and more direct in the case of equity indices than in the case of sovereign CDS spreads.

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Hvozdenska, Jana. "The relationship of bond yield curves and gross domestic product growth in Scandinavia." New Trends and Issues Proceedings on Humanities and Social Sciences 4, no. 10 (January 15, 2018): 398–405. http://dx.doi.org/10.18844/prosoc.v4i10.3110.

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The steepness of the bond yield curve is an excellent indicator of a possible future economic activity. A rise in the short rate tends to flatten the yield curve and slows down real growth in the near-term. This paper analyses the dependence between slope of the yield curve and an economic activity of selected countries between 2000 and 2016. The slope of the yield curve can be measured as the yield spread between sovereign 10-year and 3-month bonds. The results showed that the best predictive lags are the lag of four and five quarters. The results also confirm that 10-year and 3-month yield spread has a significant predictive power for real GDP growth after a financial crisis. These findings can benefit investors and provide evidence of the potential usefulness of the yield curve spreads as indicators of the future economic activity. Keywords: GDP prediction, yield curve, slope, spread.

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