Sovereign Credit Ratings And Spreads In Emerging Markets

Author : Laura Jaramillo,Ms.Michelle Michelle Tejada
Publisher : International Monetary Fund
Page : 19 pages
File Size : 42,5 Mb
Release : 2011-03-01
Category : Business & Economics
ISBN : 9781455218981

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Sovereign Credit Ratings and Spreads in Emerging Markets by Laura Jaramillo,Ms.Michelle Michelle Tejada Pdf

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 : Mr.Amadou N. R. Sy
Publisher : INTERNATIONAL MONETARY FUND
Page : 0 pages
File Size : 53,8 Mb
Release : 2001-10-01
Category : Business & Economics
ISBN : 1451858051

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Emerging Market Bond Spreads and Sovereign Credit Ratings by Mr.Amadou N. R. Sy Pdf

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 : Graciela Laura Kaminsky,Sergio L. Schmukler
Publisher : World Bank Publications
Page : 35 pages
File Size : 41,6 Mb
Release : 2001
Category : Contagio financiero
ISBN : 8210379456XXX

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Emerging Markets Instability by Graciela Laura Kaminsky,Sergio L. Schmukler Pdf

Changes in sovereign ratings affect country risk and stock returns. And these changes are transmitted across countries, with neighbor-country effects being more significant.

Author : Paolo Mauro,Nathan Sussman,Yishay Yafeh
Publisher : Oxford University Press
Page : 204 pages
File Size : 54,8 Mb
Release : 2006-03-16
Category : Business & Economics
ISBN : 9780199272693

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Emerging Markets and Financial Globalization by Paolo Mauro,Nathan Sussman,Yishay Yafeh Pdf

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 ofsuccessful 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 19thcentury 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.

Author : Mr.Amine Mati,Mr.Emanuele Baldacci,Mr.Sanjeev Gupta
Publisher : International Monetary Fund
Page : 25 pages
File Size : 47,9 Mb
Release : 2008-11-01
Category : Business & Economics
ISBN : 9781451871173

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Is it (Still) Mostly Fiscal? Determinants of Sovereign Spreads in Emerging Markets by Mr.Amine Mati,Mr.Emanuele Baldacci,Mr.Sanjeev Gupta Pdf

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.

Author : Delong Li,Mr. Nicolas E Magud,Alejandro M. Werner,Samantha Witte
Publisher : International Monetary Fund
Page : 51 pages
File Size : 45,6 Mb
Release : 2021-06-04
Category : Business & Economics
ISBN : 9781513573410

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The Long-Run Impact of Sovereign Yields on Corporate Yields in Emerging Markets by Delong Li,Mr. Nicolas E Magud,Alejandro M. Werner,Samantha Witte Pdf

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.

Author : Mr.Balazs Csonto,Mr.Iryna V. Ivaschenko
Publisher : International Monetary Fund
Page : 42 pages
File Size : 40,9 Mb
Release : 2013-07-10
Category : Business & Economics
ISBN : 9781484361481

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Determinants of Sovereign Bond Spreads in Emerging Markets by Mr.Balazs Csonto,Mr.Iryna V. Ivaschenko Pdf

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.

Author : Laura Jaramillo
Publisher : International Monetary Fund
Page : 23 pages
File Size : 52,6 Mb
Release : 2010-05-01
Category : Business & Economics
ISBN : 9781455200764

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Determinants of Investment Grade Status in Emerging Markets by Laura Jaramillo Pdf

Emerging market countries seek investment grade status to lower financing costs for the sovereign, expand the pool of potential investors to institutional investors, and allow corporates the possibility of reducing their borrowing costs. Using a random effects binomial logit model on a sample of 48 emerging markets, the paper finds that, to a large extent, investment grade rating assignments can be explained by a handful of variables. The results also suggest that efforts by emerging markets to increase the likelihood of an upgrade should focus on debt indicators rather than the other key determinants of investment grade status.

Author : Norbert Gaillard
Publisher : Springer Science & Business Media
Page : 200 pages
File Size : 42,9 Mb
Release : 2011-09-21
Category : Business & Economics
ISBN : 9781461405238

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A Century of Sovereign Ratings by Norbert Gaillard Pdf

The financial difficulties experienced by Greece since 2009 serve as a reminder that countries (i.e., sovereigns) may default on their debt. Many observers considered the financial turmoil was behind us because major advanced countries had adopted stimulus packages to prevent banks from going bankrupt. However, there are rising doubts about the creditworthiness of several advanced countries that participated in the bailouts. In this uncertain context, it is particularly crucial to be knowledgeable about sovereign ratings. This book provides the necessary broad overview, which will be of interest to both economists and investors alike. Chapter 1 presents the main issues that are addressed in this book. Chapters 2, 3, and 4 provide the key notions to understand sovereign ratings. Chapter 2 presents an overview of sovereign rating activity since the first such ratings were assigned in 1918. Chapter 3 analyzes the meaning of sovereign ratings and the significance of rating scales; it also describes the refinement of credit rating policies and tools. Chapter 4 focuses on the sovereign rating process. Chapters 5 and 6 open the black box of sovereign ratings. Chapter 5 compares sovereign rating methodologies in the interwar years with those in the modern era. After examining how rating agencies have amended their methodologies since the 1990s, Chapter 6 scrutinizes rating disagreements between credit rating agencies (CRAs). Chapters 7 and 8 measure the performances of sovereign ratings by computing default rates and accuracy ratios: Chapter 7 looks at the interwar years and Chapter 8 at the modern era. The two chapters assess which CRA assigns the most accurate ratings during the respective periods. Chapters 9 and 10 compare the perception of sovereign risk by the CRAs and market participants. Chapter 9 focuses on the relation between JP Morgan Emerging Markets Bond Index Global spreads and emerging countries’ sovereign ratings for the period 1993–2007. Chapter 10 compares the eurozone members’ sovereign ratings with Credit Default Swap-Implied Ratings (CDS-IRs) during the Greek debt crisis of November 2009–May 2010.

Author : Mr.Udaibir S. Das,Mr.Michael G. Papaioannou,Christoph Trebesch
Publisher : International Monetary Fund
Page : 40 pages
File Size : 46,6 Mb
Release : 2010-01-01
Category : Business & Economics
ISBN : 9781451961942

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Sovereign Default Risk and Private Sector Access to Capital in Emerging Markets by Mr.Udaibir S. Das,Mr.Michael G. Papaioannou,Christoph Trebesch Pdf

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 : Roman Kräussl
Publisher : Unknown
Page : 220 pages
File Size : 48,7 Mb
Release : 2003
Category : Credit ratings
ISBN : 3831426104

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Sovereign Risk, Credit Ratings and the Recent Financial Crisis in Emerging Markets by Roman Kräussl Pdf

Author : Bertrand Candelon,Mr. Amadou N. R. Sy,Mr. Rabah Arezki
Publisher : International Monetary Fund
Page : 30 pages
File Size : 43,9 Mb
Release : 2011-03-01
Category : Business & Economics
ISBN : 9781455225064

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Sovereign Rating News and Financial Markets Spillovers by Bertrand Candelon,Mr. Amadou N. R. Sy,Mr. Rabah Arezki Pdf

This paper examines the spillover effects of sovereign rating news on European financial markets during the period 2007-2010. Our main finding is that sovereign rating downgrades have statistically and economically significant spillover effects both across countries and financial markets. The sign and magnitude of the spillover effects depend both on the type of announcements, the source country experiencing the downgrade and the rating agency from which the announcements originates. However, we also find evidence that downgrades to near speculative grade ratings for relatively large economies such as Greece have a systematic spillover effects across Euro zone countries. Rating-based triggers used in banking regulation, CDS contracts, and investment mandates may help explain these results.

Author : International Monetary Fund
Publisher : International Monetary Fund
Page : 30 pages
File Size : 45,6 Mb
Release : 2010-10-15
Category : Business & Economics
ISBN : 9781455208647

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Panama by International Monetary Fund Pdf

This paper presents empirical evidence on the effects of achieving investment grade on borrowing costs for the sovereign and the private sector. This study provides background information on sovereign credit ratings and compares Panama’s key macroeconomic and institutional characteristics with those of other emerging markets. Statistical evidence on the reduction in sovereign spreads associated with obtaining investment grade status and the impact of the sovereign’s upgrade on corporate financing costs were also discussed. The model is estimated using a variety of panel regression techniques.

Author : Dilip Ratha,Prabal De,Sanket Mohapatra
Publisher : World Bank Publications
Page : 37 pages
File Size : 42,8 Mb
Release : 2007
Category : Access to Finance
ISBN : 8210379456XXX

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Shadow Sovereign Ratings for Unrated Developing Countries by Dilip Ratha,Prabal De,Sanket Mohapatra Pdf

The authors attempt to predict sovereign ratings for developing countries that do not have risk ratings from agencies such as Fitch, Moody's, and Standard and Poor's. Ratings affect capital flows to developing countries through international bond, loan and equity markets. Sovereign rating also acts as a ceiling for the foreign currency rating of sub-sovereign borrowers. As of the end of 2006, however, only 86 developing countries have been rated by the rating agencies. Of these, 15 countries have not been rated since 2004. Nearly 70 developing countries have never been rated. The results indicate that the unrated countries are not always at the bottom of the rating spectrum. Several unrated poor countries appear to have a 'B' or higher rating, in a similar range as the emerging market economies with capital market access. Drawing on the literature, the analysis presents a stylized relationship between borrowing costs and the credit rating of sovereign bonds. The launch spread rises as the credit rating deteriorates, registering a sharp rise at the investment grade threshold. Based on these findings, a case can be made in favor of helping poor countries obtain credit ratings not only for sovereign borrowing, but for sub-sovereign entities' access to international debt and equity capital. The rating model along with the stylized relationship between spreads and ratings can be useful for securitization and other financial structures, and for leveraging official aid, for improving borrowing terms in poor countries.

Author : Mr.Fabio Comelli
Publisher : International Monetary Fund
Page : 43 pages
File Size : 41,5 Mb
Release : 2012-08-01
Category : Business & Economics
ISBN : 9781475505627

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Emerging Market Sovereign Bond Spreads by Mr.Fabio Comelli Pdf

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.