Effect of sovereign rating changes on bond market returns

Malaysia has just experienced another downgrade of the sovereign rating in July last year, our capital market and currency exchange rate reacted immediately with high loses in Bursa Malaysia couple with sharp depreciation of our currency against major foreign exchanges. Therefore, the main objective...

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Main Authors: Cheng, Fan Fah, Lim, Li Hsia, Nasir, Annuar
Format: Conference or Workshop Item
Language:English
Published: 2014
Online Access:http://psasir.upm.edu.my/id/eprint/39405/1/39405.pdf
http://psasir.upm.edu.my/id/eprint/39405/
http://www.ukm.my/fep/perkem/pdf/perkem2014/PERKEM_2014_3B2.pdf
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spelling my.upm.eprints.394052016-10-07T02:32:28Z http://psasir.upm.edu.my/id/eprint/39405/ Effect of sovereign rating changes on bond market returns Cheng, Fan Fah Lim, Li Hsia Nasir, Annuar Malaysia has just experienced another downgrade of the sovereign rating in July last year, our capital market and currency exchange rate reacted immediately with high loses in Bursa Malaysia couple with sharp depreciation of our currency against major foreign exchanges. Therefore, the main objective of this study is to investigate the effect of sovereign rating changes on bond market returns control for inflation. The importance of sovereign ratings and the growing bond markets are the main motivation for this study. This paper analyse the risk and return relationship of 30 major bond markets which account for 80 percent of world GDP. This paper studies two categories of bond with different maturity period which are1year bond and 10years bond. This study collects Bond yield (YTM) for continuous five years (2007-2011) and the final sample consist of total number of 150 observations for each category of bond. The relationship between bond yields, inflation rates and real yields or inflation adjusted bond yields are examined based on individual observation and portfolio. Findings of portfolios analysis show that all the observations grouped into portfolio, there is negative relationship between sovereign rating and bond yield and positive relationship between inflation rate and bond yield. Finally, hypothesis that test on the relationship between sovereign ratings and real yields is rejected. 2014 Conference or Workshop Item NonPeerReviewed application/pdf en http://psasir.upm.edu.my/id/eprint/39405/1/39405.pdf Cheng, Fan Fah and Lim, Li Hsia and Nasir, Annuar (2014) Effect of sovereign rating changes on bond market returns. In: Ninth Malaysian National Economic Conference (PERKEM), 17-19 Oct. 2014, Kuala Terengganu, Terengganu. (pp. 400-415). http://www.ukm.my/fep/perkem/pdf/perkem2014/PERKEM_2014_3B2.pdf
institution Universiti Putra Malaysia
building UPM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Putra Malaysia
content_source UPM Institutional Repository
url_provider http://psasir.upm.edu.my/
language English
description Malaysia has just experienced another downgrade of the sovereign rating in July last year, our capital market and currency exchange rate reacted immediately with high loses in Bursa Malaysia couple with sharp depreciation of our currency against major foreign exchanges. Therefore, the main objective of this study is to investigate the effect of sovereign rating changes on bond market returns control for inflation. The importance of sovereign ratings and the growing bond markets are the main motivation for this study. This paper analyse the risk and return relationship of 30 major bond markets which account for 80 percent of world GDP. This paper studies two categories of bond with different maturity period which are1year bond and 10years bond. This study collects Bond yield (YTM) for continuous five years (2007-2011) and the final sample consist of total number of 150 observations for each category of bond. The relationship between bond yields, inflation rates and real yields or inflation adjusted bond yields are examined based on individual observation and portfolio. Findings of portfolios analysis show that all the observations grouped into portfolio, there is negative relationship between sovereign rating and bond yield and positive relationship between inflation rate and bond yield. Finally, hypothesis that test on the relationship between sovereign ratings and real yields is rejected.
format Conference or Workshop Item
author Cheng, Fan Fah
Lim, Li Hsia
Nasir, Annuar
spellingShingle Cheng, Fan Fah
Lim, Li Hsia
Nasir, Annuar
Effect of sovereign rating changes on bond market returns
author_facet Cheng, Fan Fah
Lim, Li Hsia
Nasir, Annuar
author_sort Cheng, Fan Fah
title Effect of sovereign rating changes on bond market returns
title_short Effect of sovereign rating changes on bond market returns
title_full Effect of sovereign rating changes on bond market returns
title_fullStr Effect of sovereign rating changes on bond market returns
title_full_unstemmed Effect of sovereign rating changes on bond market returns
title_sort effect of sovereign rating changes on bond market returns
publishDate 2014
url http://psasir.upm.edu.my/id/eprint/39405/1/39405.pdf
http://psasir.upm.edu.my/id/eprint/39405/
http://www.ukm.my/fep/perkem/pdf/perkem2014/PERKEM_2014_3B2.pdf
_version_ 1643832412953640960
score 13.209306