Do Sovereign Bonds Benefit Corporate Bonds in Emerging Markets?
Review of Financial Studies
2008
open access
We analyze the impact of emerging-market sovereign bonds on emerging-market corporate bonds by examining their spanning enhancement, price discovery, and issuance effects. We find that the effect of spanning enhancement is positive and large; over one-fifth of the information in corporate yield spreads is traced to innovations in sovereign bonds; and most of these effects are due to discovery and spanning of systematic risks. Further, issuance of sovereign bonds, controlling for endogeneity of market-timing decisions, lowers corporate yield and bid-ask spreads. Our results indicate that sovereign securities act as benchmarks and suggest they promote a vibrant corporate bond market.
- DOI
- 10.1093/rfs/hhn015
- Volume
- 21 (5)
- Pages
- 1983-2014
- Language
- en
- Export
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- Sources
- openalex crossref