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Determinants of Sovereign Eurobonds Yield Spread

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  • Khaled Amira

Abstract

We examine the determinants of sovereign Eurobond spread at issuance covering 1991–2000. The results of the regression models showed that yield spread increases with maturity, issue size and gross fees and decreases with credit rating and the number of managers. Higher‐grade issuers also pay a relatively higher spread to borrow long‐term funds and for smaller issues. The findings are consistent with the notion of a term structure ‘liquidity premium.’ Low‐grade issuers pay a higher spread than better‐rated countries. However, low‐grade countries pay high spread for larger funds. Credit rating is found to provide additional information in explaining the spread on sovereign Eurobonds beyond that provided by macroeconomic variables.

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  • Khaled Amira, 2004. "Determinants of Sovereign Eurobonds Yield Spread," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 31(5‐6), pages 795-821, June.
    • Handle: RePEc:bla:jbfnac:v:31:y:2004:i:5-6:p:795-821
    DOI: 10.1111/j.0306-686X.2004.00557.x
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    2. Sergio Mayordomo & Juan Ignacio Peña & Eduardo S. Schwartz, 2009. "Towards a Common European Monetary Union Risk Free Rate," NBER Working Papers 15353, National Bureau of Economic Research, Inc.
    3. Maria Bonilla-Musoles & Leandro Garcia-Menendez & Ma Luisa Marti-Selva, 2007. "Efficiency in the eurobond market: application of nonparametric techniques," Applied Financial Economics, Taylor & Francis Journals, vol. 17(6), pages 431-444.

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