Credit Default Swaps for Sovereign Debt

vikkumar's picture
Rank: Chimp | 5

I am a student and have recently started learning about CDS for sovereign bonds in emerging markets and was wondering what are the biggest events that affect its pricing. I am particularly interested in CDS's for countries that are serial debt defaulters in Latin America and Africa.
I know the World Bank publishes data on external debt to GNP and debt to exports ratios, which I assume should have a big impact on CDS prices. These ratios in combination with the IIR sovereign risk ratings seem to me like a good indication of the "debt intolerance" of a country. And of course interest rates, inflation, currency fluctuations, leadership change (populist leaders might increase debt levels) should impact prices. However, these data are not published frequently and when I am looking at some of the 1 year graphs for CDS prices, there seems to be a lot of fluctuation or more volatility than I expected.
I would like to know what reports that are published by World Bank or similar institutions tend to have the biggest impact on CDS prices for sovereign bonds of countries that are serial defaulters. I know in equity markets many investors look forward to quarterly earnings reports, what would be the equivalent of that in the fixed income market for CDS's specifically.

Comments (2)

Feb 24, 2019
vikkumar:

I would like to know what reports that are published by World Bank or similar institutions tend to have the biggest impact on CDS prices for sovereign bonds of countries that are serial defaulters.

None really... examples of events that move CDS are central bank announcements (e.g., RBI cutting rates), large fiscal stuff (e.g., South Africa bailing out Eskom, Italy budget), growth/inflation data points

Feb 27, 2019
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