Emerging Market Bond Spreads and Sovereign Credit Ratings PDF Download

Author: Mr.Amadou N. R. Sy
Publisher: INTERNATIONAL MONETARY FUND
ISBN: 9781451858051
Category : Business & Economics
Languages : en
Pages : 0

View

Book Description
This paper uses a panel data estimation of a simple univariate model of sovereign spreads on ratings to analyze statistically significant deviations from the estimated relationship. We find evidence of an asymmetric adjustment of spreads and ratings when such deviations are significant. In addition, the paper illustrates how significant disagreements between market and rating agencies' views can be used as a signal that further technical and sovereign analysis is warranted. For instance, we find that spreads were "excessively low" for most emerging markets before the Asian crisis. More recently, spreads were "excessively high" for a number of emerging markets.

Author: Marco Shinobu Matsumura
Publisher:
ISBN:
Category :
Languages : en
Pages :

View

Book Description
Our objective is to implement a credit risk pricing model for sovereign bonds and estimate the model for a historical series of yields of emerging markets bonds. We use a reduced model with a Vasicek 2-factor model on Brazilian sovereign data. The estimation occurs in two stages. Using Maximum Likelihood, we first estimate the parameters corresponding to the reference curve. Then, we find the estimates of the set of parameters corresponding to the defaultable curve conditional on the default- free parameters. The estimated model is used to calculate the dynamics of the term structure of interest rates, of credit spreads and of default probabilities.

Author: Marco S. Matsumura
Publisher:
ISBN:
Category : Government securities
Languages : en
Pages : 44

View

Book Description

Author: Iva Petrova
Publisher: International Monetary Fund
ISBN: 1455252859
Category : Business & Economics
Languages : en
Pages : 28

View

Book Description
This paper analyses the determimants of emerging market sovereign bond spreads by examining the short and long-run effects of fundamental (macroeconomic) and temporary (financial market) factors on these spreads. During the current global financial and economic crisis, sovereign bond spreads widened dramatically for both developed and emerging market economies. This deterioration has widely been attributed to rapidly growing public debts and balance sheet risks. Our results indicate that in the long run, fundamentals are significant determinants of emerging market sovereign bond spreads, while in the short run, financial volatility is a more important determinant of sperads than fundamentals indicators.

Author: Laura Jaramillo
Publisher: International Monetary Fund
ISBN: 1455218987
Category : Business & Economics
Languages : en
Pages : 19

View

Book Description
Sovereign investment grade status is often associated with lower spreads in international markets. Using a panel framework for 35 emerging markets between 1997 and 2010, thispaper finds that investment grade status reduces spreads by 36 percent, above and beyond what is implied by macroeconomic fundamentals. This compares to a 5-10 percent reduction in spreads following upgrades within the investment grade asset class, and no impact formovements within the speculative grade asset class, ceteris paribus. While global financial conditions play a central role in determining spreads, market sentiment improves with lower external public debt to GDP levels and higher domestic growth rates.

Author: Amadou Nicolas Racine Sy
Publisher:
ISBN:
Category :
Languages : en
Pages : 29

View

Book Description
This paper uses a panel data estimation of a simple univariate model of sovereign spreads on ratings to analyze statistically significant deviations from the estimated relationship. We find evidence of an asymmetric adjustment of spreads and ratings when such deviations are significant. In addition, the paper illustrates how significant disagreements between market and rating agencies' views can be used as a signal that further technical and sovereign analysis is warranted. For instance, we find that spreads were quot;excessively lowquot; for most emerging markets before the Asian crisis. More recently, spreads were quot;excessively highquot; for a number of emerging markets.

Author: Mr.Udaibir S. Das
Publisher: International Monetary Fund
ISBN: 1451961944
Category : Business & Economics
Languages : en
Pages : 40

View

Book Description
Top down spillovers of sovereign default risk can have serious consequences for the private sector in emerging markets. This paper analyzes the effects of these spillovers using firm-level data from 31 emerging market economies. We assess how sovereign risk affects corporate access to international capital markets, in the form of external credit (loans and bond issuances) and equity issuances. The study first analyzes the impact of sovereign debt crises during the 1980s and 1990s. It goes on to examine the 1993 to 2007 period, using additional measures of sovereign risk-sovereign bond spreads and sovereign ratings-as explanatory variables. Overall, we find that sovereign default risk is a crucial determinant of private sector access to capital, be it external debt or equity. We also find that crisis resolution patterns matter and that defaults towards private creditors have stronger adverse consequences than defaults to official creditors.

Author: Guillermo Larraín
Publisher:
ISBN:
Category : Bonds
Languages : en
Pages : 44

View

Book Description

Author: Metodij Hadzi-Vaskov
Publisher: International Monetary Fund
ISBN: 1475568983
Category : Business & Economics
Languages : en
Pages : 37

View

Book Description
Does gross or net debt matter for long-term sovereign spreads in emerging markets? The topic is important for undestanding the borrowing cost implications of public assetliability management decisions (e.g. using assets to lower debt). We investigate this question using data on emerging market economies (EMEs) over the period 1998–2014. We find that both gross debt and assets have a significant impact on long-term sovereign bond spreads in emerging markets, with effects roughly offsetting each other (coefficients of opposite sign and similar magnitude). Hence, net debt seems more appropriate than gross debt when evaluating the impact of indebtedness on spreads. The empirical results suggest that an increase in net debt by 10 percentage points of GDP implies an increase in the spread by 100–120 basis points, and the effect is larger during periods of domestic distress. The key results from this empirical study are quite robust to alternative specifications and subgroups of EMEs.

Author: Eduardo A. Cavallo
Publisher: International Monetary Fund
ISBN:
Category : Business & Economics
Languages : en
Pages : 30

View

Book Description
This study explores the determinants of corporate bond spreads in emerging markets economies. Using a largely unexploited dataset, the paper finds that corporate bond spreads are determined by firm-specific variables, bond characteristics, macroeconomic conditions, sovereign risk, and global factors. A variance decomposition analysis shows that firm-level characteristics account for the larger share of the variance. In addition, the paper finds two asymmetries. The first is in line with the sovereign ceiling "lite" hypothesis which states that the transfer of risk from the sovereign to the private sector is less than 1 to 1. The second is consistent with the popular notion that panics are common in emerging markets where investors are less informed and more prone to herding.