Skip to main content
padlock icon - secure page this page is secure

Sovereign Spreads and Contagion Risks in

Buy Article:

$52.00 + tax (Refund Policy)

In the aftermath of the recent global financial turmoil, sovereign spreads have exhibited a significant degree of volatility. This paper explores how much of these movements in the spreads of Asian economies reflected shifts in global risk aversion or country‐specific risks, directly from worsening fundamentals, or indirectly from spillovers originating in other sovereigns, or risks and uncertainty surrounding their exchange rates. This analysis finds that earlier in the crisis, the increase in market‐implied contagion led to an increase of sovereign bond yields relative to the swaps. Higher‐rated sovereign bonds in Asia benefited from the flight to quality that accompanied the increase in global risk aversion during this period. Once the systemic risks in the financial sectors worldwide were contained, the risk of sovereign spillovers eased, which, together with a fall in perceived currency‐related risks, led to a fall in sovereign bond yields relative to swaps yields across the board. Comparing the situation to that of Europe, the present paper concludes that the debt crisis in the euro area has not affected the perception of sovereign risks of Asian economies. In fact, a fall in exchange rate and spillover risks, combined with stronger fundamentals, have led to a continued normalization of Asian sovereign spreads since the height of the financial crisis.
No References
No Citations
No Supplementary Data
No Article Media
No Metrics

Document Type: Research Article

Publication date: September 1, 2013

  • Access Key
  • Free content
  • Partial Free content
  • New content
  • Open access content
  • Partial Open access content
  • Subscribed content
  • Partial Subscribed content
  • Free trial content
Cookie Policy
X
Cookie Policy
Ingenta Connect website makes use of cookies so as to keep track of data that you have filled in. I am Happy with this Find out more