Randl, Otto, Zechner, Josef. 2018. Sovereign Reputation and Yield Spreads: A Case Study on Retroactive Legislation. German Economic Review. 19 (3), 260-279.

RIS

@ARTICLE{Randl2018,
title = {Sovereign Reputation and Yield Spreads: A Case Study on Retroactive Legislation.},
author = {Otto Randl and Josef Zechner},
year = {2018},
doi = {https://doi.org/10.1111/geer.12128},
volume = {19},
number = {3},
language = {EN},
pages = {260-279},
journal = {German Economic Review},
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.},
}