The credit signals that matter most for sovereign bond spreads with split rating

Huong Vu, Rasha Alsakka* (Corresponding Author), Owain ap Gwilym

*Corresponding author for this work

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

We investigate how split ratings influence the information content of credit rating events on the sovereign bond markets during 2000-2012. We find that market reactions are far stronger for negative events on the inferior ratings and for positive events on the superior ratings. Such evidence suggests aversion of market participants to the ambiguity inherent in split ratings. Sovereign credit spreads are particularly responsive to negative events by S&P (the more conservative agency in the sample). Moody's positive events have a significant impact only when Moody's assigns superior pre-event ratings compared with S&P. There is little evidence that split ratings involving Fitch have any market implication.

Original languageEnglish
Pages (from-to)174-191
Number of pages18
JournalJournal of International Money and Finance
Volume53
Early online date4 Feb 2015
DOIs
Publication statusPublished - 1 May 2015

Fingerprint

Sovereign bonds
Rating
Credit
Bond spreads
Credit rating
Bond market
Market reaction
Credit spreads
Information content

Keywords

  • Ambiguity aversion
  • Bond spreads
  • Sovereign credit event
  • Split ratings

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Cite this

The credit signals that matter most for sovereign bond spreads with split rating. / Vu, Huong; Alsakka, Rasha (Corresponding Author); Gwilym, Owain ap.

In: Journal of International Money and Finance, Vol. 53, 01.05.2015, p. 174-191.

Research output: Contribution to journalArticle

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