We use EU sovereign bond yield and CDS spreads daily data to carry out an event study analysis on the reaction of government yield spreads before and after announcements from rating agencies (Standard and Poor’s, Moody’s, Fitch). Our results show significant responses of government bond yield spreads to changes in rating notations and outlook, particularly in the case of negative announcements. Announcements are not anticipated at 1–2 months horizon but there is bi-directional causality between ratings and spreads within 1–2 weeks; spillover effects especially among EMU countries and from lower rated countries to higher rated countries; and persistence effects for recently downgraded countries.

Furceri, D., Gomes, P., Afonso, A. (2012). Sovereign credit ratings and financial markets linkages: Application to European data. JOURNAL OF INTERNATIONAL MONEY AND FINANCE, 31(3), 606-638 [10.1016/j.jimonfin.2012.01.016].

Sovereign credit ratings and financial markets linkages: Application to European data

FURCERI, Davide;
2012-01-01

Abstract

We use EU sovereign bond yield and CDS spreads daily data to carry out an event study analysis on the reaction of government yield spreads before and after announcements from rating agencies (Standard and Poor’s, Moody’s, Fitch). Our results show significant responses of government bond yield spreads to changes in rating notations and outlook, particularly in the case of negative announcements. Announcements are not anticipated at 1–2 months horizon but there is bi-directional causality between ratings and spreads within 1–2 weeks; spillover effects especially among EMU countries and from lower rated countries to higher rated countries; and persistence effects for recently downgraded countries.
Settore SECS-P/02 Politica Economica
Furceri, D., Gomes, P., Afonso, A. (2012). Sovereign credit ratings and financial markets linkages: Application to European data. JOURNAL OF INTERNATIONAL MONEY AND FINANCE, 31(3), 606-638 [10.1016/j.jimonfin.2012.01.016].
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10447/79503
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