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Impact of international and local conditions on sovereign bond spreads: International evidence

Author

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  • Selma Izadi
  • M. Kabir Hassan

Abstract

This paper examines the effect of international and domestic factors on the sovereign bond spreads for 22 developed countries in North America, Europe and Pacific Rim regions. First, for all the regions the impact of global factors on the sovereign bond spreads is more intense than regional factors. Second, the findings confirm that for the bond spreads of each region over its domestic government bonds, the countries’ local fundamentals are better determinants of the spreads compared to the spread over US government bonds as a safe haven. Third, the influence of worldwide factors in the Eurozone compared to other regions bond spreads is less. Fourth, the relationship of the market sentiment and the investor risk aversion with the sovereign bond spreads of all regions is positive. Equity market volatility plays significant role in yield speads in international bond markets

Suggested Citation

  • Selma Izadi & M. Kabir Hassan, 2018. "Impact of international and local conditions on sovereign bond spreads: International evidence," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 18(1), pages 41-51, March.
    • Handle: RePEc:bor:bistre:v:18:y:2018:i:1:p:41-51
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    File URL: https://www.sciencedirect.com/science/article/pii/S2214845017300832
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    Cited by:

    1. Dachraoui, Hajer & Smida, Mounir & Sebri, Maamar, 2020. "Role of capital flight as a driver of sovereign bond spreads in Latin American countries," International Economics, Elsevier, vol. 162(C), pages 15-33.

    More about this item

    Keywords

    Global bond markets; Sovereign yield spreads; Macroeconomics fundamentals; Panel regressions;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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