Determinants Of Sovereign Bond Spreads In Emerging Markets
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Determinants Of Sovereign Bond Spreads In Emerging Markets
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Author : Mr.Balazs Csonto
language : en
Publisher: International Monetary Fund
Release Date : 2013-07-10
Determinants Of Sovereign Bond Spreads In Emerging Markets written by Mr.Balazs Csonto and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-07-10 with Business & Economics categories.
We analyze the relationship between global and country-specific factors and emerging market debt spreads from three different angles. First, we aim to disentangle the effect of global and country-specific developments, and find that while both country-specific and global developments are important in the long-run, global factors are main determinants of spreads in the short-run. Second, we investigate whether and how the strength of fundamentals is related to the sensitivity of spreads to global factors. Countries with stronger fundamentals tend to have lower sensitivity to changes in global risk aversion. Third, we decompose changes in spreads and analyze the behavior of explained and unexplained components over different periods. To do so, we break down fitted changes in spreads into the contribution of country-specific and global factors, as well as decompose changes in the residual into the correction of initial misalignment and an increase/decrease in misalignment. We find that changes in spreads follow periods of tightening/widening, which are well-explained by the model; and the dynamics of the components of the unexplained residual follow all the major developments that impact market sentiment. In particular, we find that in the periods of severe marketstress, such as during the intensive phase of the Eurozone debt crisis, global factors tend to drive changes in the spreads and the misalignment tends to increase in magnitude and its relative share in actual spreads.
Determinants Of Emerging Market Sovereign Bond Spreads
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Author : Iva Petrova
language : en
Publisher: International Monetary Fund
Release Date : 2010-12-01
Determinants Of Emerging Market Sovereign Bond Spreads written by Iva Petrova and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010-12-01 with Business & Economics categories.
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.
Is It Still Mostly Fiscal Determinants Of Sovereign Spreads In Emerging Markets
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Author : Mr.Amine Mati
language : en
Publisher: International Monetary Fund
Release Date : 2008-11-01
Is It Still Mostly Fiscal Determinants Of Sovereign Spreads In Emerging Markets written by Mr.Amine Mati and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008-11-01 with Business & Economics categories.
Using a panel of 30 emerging market economies from 1997 to 2007, this paper investigates the determinants of country risk premiums as measured by sovereign bond spreads. Unlike previous studies, the results indicate that both fiscal and political factors matter for credit risk in emerging markets. Lower levels of political risk are associated with tighter spreads, while efforts at fiscal consolidation narrow credit spreads, especially in countries that experienced prior defaults. The composition of fiscal policy matters: spending on public investment contributes to lower spreads as long as the fiscal position remains sustainable and the fiscal deficit does not worsen.
International Sovereign Bonds By Emerging Markets And Developing Economies
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Author : Andrea Presbitero
language : en
Publisher: International Monetary Fund
Release Date : 2015-12-24
International Sovereign Bonds By Emerging Markets And Developing Economies written by Andrea Presbitero and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-12-24 with Business & Economics categories.
What determines the ability of low-income developing countries to issue bonds in international capital and what explains the spreads on these bonds? This paper examines these questions using a dataset that includes emerging markets and developing economies (EMDEs) that issued sovereign bonds at least once during the period 1995-2013 as well as those that did not. We find that an EMDE is more likely to issue a bond when, in comparison with non-issuing peers, it is larger in economic size, has higher per capita GDP, and has stronger macroeconomic fundamentals and government. Spreads on sovereign bonds are lower for countries with strong external and fiscal positions, as well as robust economic growth and government effectiveness. With regard to global factors, the results show that sovereign bond spreads are reduced in periods of lower market volatility.
Emerging Markets And Financial Globalization
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Author : Paolo Mauro
language : en
Publisher: OUP Oxford
Release Date : 2006-03-16
Emerging Markets And Financial Globalization written by Paolo Mauro and has been published by OUP Oxford this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006-03-16 with Business & Economics categories.
The frequency and virulence of recent financial crises have led to calls for reform of the current international financial architecture. In an effort to learn more about today's international financial environment, the authors turn to an earlier era of financial globalization between 1870 and 1913. By examining data on sovereign bonds issued by borrowing developing countries in this earlier period and in the present day, the authors are able to identify the characteristics of successful borrowers in the two periods. They are then able to show that global crises or contagion are a feature of the 1990s which was hardly known in the previous era of globalization. Finally, the authors draw lessons for today from archival data on mechanisms used by British investors in the 19th century to address sovereign defaults. Using new qualitative and quantitative data, the authors skilfully apply a variety of approaches in order to better understand how problems of volatility and debt crises are dealt with in international financial markets.
Emerging Market Sovereign Bond Spreads
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Author : Mr.Fabio Comelli
language : en
Publisher: International Monetary Fund
Release Date : 2012-08-01
Emerging Market Sovereign Bond Spreads written by Mr.Fabio Comelli and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012-08-01 with Business & Economics categories.
We estimate sovereign bond spreads of 28 emerging economies over the period January 1998-December 2011 and test the ability of the model in generating accurate in-sample predictions for emerging economies bond spreads. The impact and significance of country-specific and global explanatory variables on bond spreads varies across regions, as well as economic periods. During crisis times, good macroeconomic fundamentals are helpful in containing bond spreads, but less than in non-crisis times, possibly reflecting the impact of extra-economic forces on bond spreads when a financial crisis occurs. For some emerging economies, in-sample predictions of the monthly changes in bond spreads obtained with rolling regression routines are significantly more accurate than forecasts obtained with a random walk. Rolling regression-based bond spread predictions appear to convey more information than those obtained with a linear prediction method. By contrast, bond spreads forecasts obtained with a linear prediction method are less accurate than those obtained with random guessing.
Bond Yields In Emerging Economies
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Author : Laura Jaramillo
language : en
Publisher: International Monetary Fund
Release Date : 2012-08-01
Bond Yields In Emerging Economies written by Laura Jaramillo and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012-08-01 with Business & Economics categories.
While many studies have looked into the determinants of yields on externally issued sovereign bonds of emerging economies, analysis of domestically issued bonds has hitherto been limited, despite their growing relevance. This paper finds that the extent to which fiscal variables affect domestic bond yields in emerging economies depends on the level of global risk aversion. During tranquil times in global markets, fiscal variables do not seem to be a significant determinant of domestic bond yields in emerging economies. However, when market participants are on edge, they pay greater attention to country-specific fiscal fundamentals, revealing greater alertness about default risk.
The Long Run Impact Of Sovereign Yields On Corporate Yields In Emerging Markets
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Author : Delong Li
language : en
Publisher: International Monetary Fund
Release Date : 2021-06-04
The Long Run Impact Of Sovereign Yields On Corporate Yields In Emerging Markets written by Delong Li and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-06-04 with Business & Economics categories.
We analyze the long-run impact of emerging-market sovereign bond yields on corporate bond yields, finding that the average pass-through is around one. The pass-through is larger in countries with greater sovereign risks and where sovereign bonds are more liquid. It is also greater for corporate bonds with lower ratings, shorter maturities, and for those issued by financial companies and government-related firms. Our results support theoretical arguments that corporate and sovereign yields are linked together through credit risks and liquidity premiums. Consequently, high sovereign risks may slowdown growth by persistently increasing private sector borrowing costs.
The Determinants Of Corporate Risk In Emerging Markets
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Author : Eduardo A. Cavallo
language : en
Publisher: International Monetary Fund
Release Date : 2007-09
The Determinants Of Corporate Risk In Emerging Markets written by Eduardo A. Cavallo and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007-09 with Business & Economics categories.
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.
On The Determinants Of First Time Sovereign Bond Issues
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Author : Mr.David A. Grigorian
language : en
Publisher: International Monetary Fund
Release Date : 2003-09-01
On The Determinants Of First Time Sovereign Bond Issues written by Mr.David A. Grigorian and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003-09-01 with Business & Economics categories.
In recent years, the number of countries which have borrowed in international capital markets by issuing sovereign bonds has increased substantially. For these countries, capital market access meant a de facto acknowledgement of their policy successes and improvements in their creditworthiness that enabled them to graduate from the group of official financing recipients into a more advanced group of emerging market economies. The paper looks at the determinants of sovereign bond issuances and derives the relationship between internal and external factors and market access using a simple macro model. The market access condition is then translated into a simple rule that requires an excess demand for the sovereign bonds in question. Regression results based on this model offer some insights into peculiarities of first-time sovereign bond issues that could be used in policy deliberations.