Ten-Year after the Asian Financial Crisis: Understanding Spread Determinants on New Emerging Market Bonds

• Main Author: Gracia S Ugut
• Format: Article
• Language: English
• Published: Universitas Indonesia 2014-08-01
• Series: Indonesian Capital Market Review
• Online Access: http://journal.ui.ac.id/index.php/icmr/article/view/3630

The &nbsp;spread &nbsp;determinants &nbsp;of &nbsp;emerging &nbsp;market &nbsp;bonds &nbsp;have &nbsp;shown &nbsp;some &nbsp;similarity &nbsp;with&nbsp;the &nbsp;non-investment &nbsp;grade &nbsp;bonds. &nbsp;In &nbsp;the &nbsp;study, &nbsp;the &nbsp;author &nbsp;found &nbsp;that &nbsp;there &nbsp;are &nbsp;significant&nbsp;numbers of quantitiable factors to explain the variance in the risk premium. The factors were&nbsp;classified &nbsp;into &nbsp;company &nbsp;speciic &nbsp;variables &nbsp;and &nbsp;macroeconomic &nbsp;variables, &nbsp;such &nbsp;as &nbsp;rating,&nbsp;term, &nbsp;and &nbsp;secondary &nbsp;market &nbsp;spread, &nbsp;interest &nbsp;rate &nbsp;change &nbsp;and &nbsp;rising &nbsp;price &nbsp;of &nbsp;commodities.&nbsp;For &nbsp;the &nbsp;unexplained &nbsp;variance &nbsp;in &nbsp;risk &nbsp;premiums, &nbsp;the &nbsp;study &nbsp;suggested &nbsp;some &nbsp;explanation &nbsp;on&nbsp;the underwriter's effectiveness in presenting the issuer to the investors and correlation of the&nbsp;emerging-market debt to the other asset classes. &nbsp;<br />