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Unraveling Emerging Market Sovereign Yields: A Novel Three-Part Decomposition

In: Proceedings of the International Conference on Policies, Processes and Practices for Transforming Underdeveloped Economies into Developed Economies (PPP-UD 2025)

Author

Listed:
  • Akhil Rana

    (University of Connecticut, School of Business -Financial Risk Management)

Abstract

This research suggests an innovative framework for fragmenting sovereign bond outputs in evolving economies by unambiguously including credit risk elements. Using intraday data to separate unanticipated adjustments in US monetary policy, the study analyzes their impact on results in developing domains. The yield components are decomposed into predicted short-term rates, expression premiums, and credit risk premiums, providing a thorough outlook on how U.S. monetary policy transmits internationally. The results show that surprises in US policy trigger modifications in expectations of policy rates and guide to the revaluation of both interest rate and credit risk in evolving sectors. In specific, evolving market monetary authorities regularly respond in tandem with US policy changes, unconventional U.S. metrics impact expression premium interactions abroad, and sovereign credit risk reacts to U.S. monetary policy variations.

Suggested Citation

  • Akhil Rana, 2025. "Unraveling Emerging Market Sovereign Yields: A Novel Three-Part Decomposition," Advances in Economics, Business and Management Research, in: Anuradha Jain & Sachin Gupta (ed.), Proceedings of the International Conference on Policies, Processes and Practices for Transforming Underdeveloped Economies into Developed Economies (P, pages 298-315, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-894-3_21
    DOI: 10.2991/978-94-6463-894-3_21
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