Speculative-Grade sovereign rating Cycles: Sovereign debt Defaults, restructurings and resolution

Luca Agnello, Vítor Castro and Ricardo M. Sousa

Journal of International Financial Markets, Institutions and Money, 2025, vol. 103, issue C

Abstract: We analyse how defaults, debt restructurings and resolution affect the duration of low sovereign rating cycles in a change-point Weibull duration model setup. Using a large panel of sovereign ratings data issued by the three largest credit rating agencies, we show that sovereigns implementing nominal debt relief during defaults or with an history of debt restructurings (including those supported by multilateral institutions) or (long) exits from international capital markets hardly escape the ’curse’ of protracted speculative-grade spells. Governments also tend to discriminate between domestic and foreign agents, ’prioritising’ foreign currency defaults.

Keywords: Sovereign ratings; Speculative-grade; change-point Weibull duration model; Defaults; Debt restructurings; Debt resolution (search for similar items in EconPapers)
JEL-codes: C23 C25 G10 G15 G24 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:103:y:2025:i:c:s1042443125000873

DOI: 10.1016/j.intfin.2025.102197

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