Emerging Market Bond Spreads and Sovereign Credit Ratings : Reconciling Market Views with Economic Fundamentals

Author/Editor:

Amadou N Sy

Publication Date:

October 1, 2001

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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.

Series:

Working Paper No. 01/165

Subject:

English

Publication Date:

October 1, 2001

ISBN/ISSN:

9781451858051/1018-5941

Stock No:

WPIEA1652001

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

29

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