 Long-Term Returns in Distressed Sovereign Bond Markets: How Did Investors Fare?Jochen Andritzky and Julian Schumacher No 2019/138, IMF Working Papers from International Monetary Fund Abstract: Sovereign debt restructurings are perceived as inflicting large losses to bondholders. However, many bonds feature high coupons and often exhibit strong post-crisis recoveries. To account for these aspects, we analyze the long-term returns of sovereign bonds during 32 crises since 1998, taking into account losses from bond exchanges as well as profits before and after such events. We show that the average excess return over risk-free rates in crises with debt restructuring is not significantly lower than the return on bonds in crises without restructuring. Returns differ considerably depending on the investment strategy: Investors who sell during crises fare much worse than buy-and-hold investors or investors entering the market upon signs of distress Keywords: WP; excess return; crisis episode; debt crisis; distress investor; net present value; public debt; sovereign risk; sovereign default; bond restructuring; period return; return index; investor type; long-term return; investment strategy; longer-term return; market value; returns in sovereign bond bond market; bond investor; buy-and-hold investor; Bonds; Sovereign bonds; Debt restructuring; Crisis resolution; Global (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:imf:imfwpa:2019/138 Ordering information: This working paper can be ordered from 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. |
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