On the Determinants of First-Time Sovereign Bond Issues

160

134

This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.What determines the ability of governments from developing countries to access international credit markets? We examine this question using detailed data on sovereign bond issuances and public syndicated bank loans since 1982. We find that traditional measures of a country's links with the rest of the world (such as trade openness) and traditional liquidity and macroeconomic indicators do not help much in explaining market access. However, a country's vulnerability to shocks and the perceived quality of its policies and institutions appear to be important determinants of its government's ability to tap the markets. We are unable to detect strong punishment of defaulting countries by credit markets. JEL Classification Numbers: F34, G15

Section: B Panel Regressionsmentioning

confidence: 99%

Sovereign Borrowing by Developing Countries: What Determines Market Access?

Gelos

Sandleris²,

Sahay³

2004

160

134

“…Also, most of the initial bond issues were denominated in U.S. dollars and offered relatively high coupons to attract greater investor interest. Further, most recent initial issues included collective action clauses (CACs) 5 and were privately placed or issued as Eurobonds rather than as global bonds (Grigorian, 2003).…”

Section: Recent Trends In Em and Lic Sovereign Bond Issuancementioning

confidence: 99%

Strategic Considerations for First-Time Sovereign Bond Issuers

Polan

Das²,

Papaioannou³

2008

This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.The recent round of debt relief has restored debt sustainability in many low-income countries (LICs). This, along with a continued search for yield and desire for portfolio diversification by investors, has increased the range of viable financing options, including international bonds, for many emerging market (EM) economies and LICs. This paper presents some of the advantages and disadvantages of international debut bonds, within a debt sustainability framework. It outlines key preconditions and discusses strategic considerations that countries need to take into account when contemplating bond issuance in international markets for the first time. In this context, the paper also discusses some typical pitfalls in accessing international capital markets, including excessive issue size relative to the intended use of bond proceeds, issuance of bullet bonds, and inadequate preparation for accessing the markets. JEL Classification Numbers: F34, G12, G15, G24

“…However, there is little evidence on what determines lending to resume to countries that suffered financial crises and structural institutional weakness. For instance, Gelos et al (2004) and Grigorian (2003) investigate the circumstances under which a country gains access to international capital markets, but do not focus on the specific case of sovereigns seeking new financing after experiencing a financial crisis. In this context, the aim of this paper is to focus specifically on the issue of market re-access after countries have undergone financial and debt crisis.…”

Section: A Backgroundmentioning

confidence: 99%

“…Econometric analysis has mostly focused on the more general question of how a sovereign gains access to capital markets without focusing particularly on the cases of sovereigns seeking new financing after experiencing difficulties in servicing their debt (Gelos et al 2004, Grigorian 2003. Thus, there is little evidence on any factor specifically affecting countries that suffered financial crisis as opposed to any country wishing to access capital markets.…”

Section: Introductionmentioning

confidence: 99%

Re-Accessing International Capital Markets After Financial Crises: Some Empirical Evidence

Zanforlin

2007

This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.The paper analyzes the factors that contribute to the re-access of countries that emerge from a severe financial crisis to the international capital markets. It conjectures that these factors depend on a sovereign's commitment and ability to repay its foreign debt, signaled by sound macroeconomic policies, and the global liquidity environment. Using panel data for 49 countries over a 24-year period, the analysis uses a simple probit approach to show that, indeed, a sustainable debt profile and a sound external position, accompanied by a favorable global liquidity environment, are key factors in affecting the likelihood a sovereign reaccesses international capital markets. JEL Classification Numbers: F34, G15, O10