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Local-Currency sovereign risk on South African government bonds

Author

Listed:
  • Mulalo Mamburu

Abstract

While local-currency bond markets have become a dominant source of emerging-market financing and an integral component of the global financial system, market-observed measures of sovereign default risk are still based on foreign-currency denominated debt. This note replicates and assesses the Du-Schreger credit risk spread on local-currency debt for South Africa for the period between January 2008 and December 2021. This credit spread is found to be a good measure of local-currency sovereign risk for South Africa during the period under review as it captures the evolution in key developments relevant to domestic sovereign risk while being less responsive than market-based measures to global developments that are not directly linked to fiscal risk.

Suggested Citation

  • Mulalo Mamburu, 2022. "Local-Currency sovereign risk on South African government bonds," ERSA Working Paper Series 20, Economic Research Southern Africa.
    • Handle: RePEc:rza:ersawp:20
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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