 Sovereign debt ratings and the country composition of cross-border holdings of euro area sovereign debtLeo de Haan and Robert Vermeulen Journal of International Money and Finance, 2021, vol. 119, issue C Abstract: This paper documents how sovereign debt ratings shape the country composition of euro area cross-border holdings of euro area sovereign debt, using granular sectoral security holdings statistics for the period 2009Q4 until 2016Q1. Credit risk is the main risk for bond investors when investing in bonds that are issued in the same currency as the currency of the investor’s home country. Sovereign debt ratings provided by rating agencies give investors key information on the creditworthiness of governments. The results in this paper show that investors respond differently to credit ratings. In particular, we find that investors from core euro area countries respond more to credit ratings than investors from peripheral euro area countries. The results show that banks and insurance companies in core countries hold significantly more sovereign bonds of countries with higher credit ratings. In peripheral countries we do not find a positive relationship between ratings and sovereign bond holdings. Keywords: Euro area; Asset allocation; Sovereign debt; Sovereign debt rating (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:119:y:2021:i:c:s0261560621001248 DOI: 10.1016/j.jimonfin.2021.102473 Access Statistics for this article Journal of International Money and Finance is currently edited by J. R. Lothian More articles in Journal of International Money and Finance from Elsevier |
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