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Astonishing insights: emerging market debt spreads throughout the pandemic

Author

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  • Mariya Gubareva
  • Zaghum Umar
  • Tatiana Sokolova
  • Xuan Vinh Vo

Abstract

We investigate how Covid-19 affects the emerging market (EM) bonds by analysing, on a standalone basis, investment grade (IG) and high yield (HY) debt per type of issuer. We document evidence that the option-adjusted spreads (OAS) of the IG and HY financials have recovered to the pre-Covid levels by the end of year 2020, while for the HY sovereigns and corporates the OAS remain twice as wide as before the pandemic. The weight of the liquidity component in the OAS for the IG sovereigns has climbed to astonishing 45%. Our results are potentially useful for investors, traders, risk managers and regulators.

Suggested Citation

  • Mariya Gubareva & Zaghum Umar & Tatiana Sokolova & Xuan Vinh Vo, 2022. "Astonishing insights: emerging market debt spreads throughout the pandemic," Applied Economics, Taylor & Francis Journals, vol. 54(18), pages 2067-2076, April.
    • Handle: RePEc:taf:applec:v:54:y:2022:i:18:p:2067-2076
    DOI: 10.1080/00036846.2021.1984383
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    Cited by:

    1. Claudiu Tiberiu Albulescu & Eugenia Grecu, 2023. "Government Interventions and Sovereign Bond Market Volatility during COVID-19: A Quantile Analysis," Mathematics, MDPI, vol. 11(5), pages 1-14, February.

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