Randl, Otto, Zechner, Josef. 2018. Sovereign Reputation and Yield Spreads: A Case Study on Retroactive Legislation. German Economic Review. 19 (3), 260-279.
BibTeX
Abstract
This paper uses recent legislation in Austria to establish a link between sovereign reputation and yield spreads. In 2009, Hypo Alpe Adria International, a bank previously co‐owned by the regional government of Carinthia, had been nationalized by Austria's central government in order to avoid a default triggering multi‐billion Euro local government guarantees. In 2015, special legislation retroactively introduced collective action clauses allowing a haircut on both the bonds and the guarantees while avoiding formal default. We document that legislative and administrative action designed to partly abrogate the guarantees resulted in a loss of reputation, leading to higher yield spreads for sovereign debt. Our analysis of covered bonds uncovers an increase in yield spreads on the secondary market and a deterioration of primary market conditions.
Tags
Press 'enter' for creating the tagPublication's profile
Status of publication | Published |
---|---|
Affiliation | WU |
Type of publication | Journal article |
Journal | German Economic Review |
Citation Index | SSCI |
WU Journalrating 2009 | A |
WU-Journal-Rating new | FIN-A, STRAT-B, VW-D, WH-B |
Language | English |
Title | Sovereign Reputation and Yield Spreads: A Case Study on Retroactive Legislation. |
Volume | 19 |
Number | 3 |
Year | 2018 |
Page from | 260 |
Page to | 279 |
Reviewed? | Y |
DOI | https://doi.org/10.1111/geer.12128 |
Open Access | N |
JEL | G12, G14, H63 |
Associations
- People
- Randl, Otto (Details)
- Zechner, Josef (Details)
- Organization
- Institute for Finance, Banking and Insurance IN (Details)
- Research Institute for Capital Markets FI (Details)
- Research areas (ÖSTAT Classification 'Statistik Austria')
- 5358 Corporate finances (Details)
- 5361 Financial management (Details)