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 |
|---|---|
| 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 |
