Sovereign reputation and yield spreads: a case study on retroactive legislation
- 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.
Author: | Otto Randl, Josef ZechnerORCiDGND |
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URN: | urn:nbn:de:hebis:30:3-416841 |
URL: | https://ssrn.com/abstract=2853354 |
Parent Title (English): | Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 545 |
Series (Serial Number): | CFS working paper series (545) |
Publisher: | Center for Financial Studies |
Place of publication: | Frankfurt, M. |
Document Type: | Working Paper |
Language: | English |
Date of Publication (online): | 2016/10/18 |
Year of first Publication: | 2016 |
Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
Release Date: | 2016/10/18 |
Edition: | 7th June, 2016 |
Page Number: | 35 |
HeBIS-PPN: | 390270970 |
Institutes: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) | |
Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
Sammlungen: | Universitätspublikationen |
Licence (German): | Deutsches Urheberrecht |