Sovereign Bond Prices, Haircuts and Maturity

Tamon Asonuma, Dirk Niepelt and Romain Ranciere

No 2017/119, IMF Working Papers from International Monetary Fund

Abstract: Rejecting a common assumption in the sovereign debt literature, we document that creditor losses (“haircuts”) during sovereign restructuring episodes are asymmetric across debt instruments. We code a comprehensive dataset on instrument-specific haircuts for 28 debt restructurings with private creditors in 1999–2015 and find that haircuts on shorter-term debt are larger than those on debt of longer maturity. In a standard asset pricing model, we show that increasing short-run default risk in the run-up to a restructuring episode can explain the stylized fact. The data confirms the predicted relation between perceived default risk, bond prices, and haircuts by maturity.

Keywords: WP; coupon rate; Sovereign Debt; Default; Debt Restructuring; Bond Prices; Haircuts; Maturity; Default Probability; recovery rate; bond price differential; price difference; longer-term bond; term structure; bond maturity; Asset prices; Bonds; Securities; Debt default (search for similar items in EconPapers)
Pages: 37
Date: 2017-05-22
References: Add references at CitEc
Citations: View citations in EconPapers (23)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=44931 (application/pdf)

Related works:
Journal Article: Sovereign bond prices, haircuts and maturity (2023)
Working Paper: Sovereign Bond Prices, Haircuts and Maturity (2022)
Working Paper: Sovereign Bond Prices, Haircuts and Maturity (2017)
Working Paper: Sovereign Bond Prices, Haircuts and Maturity (2017)
Working Paper: Sovereign Bond Prices, Haircuts and Maturity (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2017/119

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().