Credit rating agencies and their impact on the bond markets of EU countries

• Thesis title in Czech: Ratingové agetury a jejich dopad na ceny dluhopisů v EU
• Thesis title in English: Credit rating agencies and their impact on the bond markets of EU countries
• Key words: úvěrové hodnocení; pojištění proti nesplacení dluhopisu; ratingové agentury; vládní dluhopis; Evropská unie
• English key words: credit rating; credit default swap; rating agency; sovereign bond; EU
• Academic year of topic announcement: 2011/2012
• Thesis type: diploma thesis
• Thesis language: angličtina
• Department: Institute of Economic Studies (23-IES)
• Supervisor: prof. Roman Horváth, Ph.D.
• Author: hidden - assigned by the advisor
• Date of registration: 09.02.2012
• Date of assignment: 09.02.2012
• Date and time of defence: 30.01.2013 00:00
• Venue of defence: IES
• Date of electronic submission: 07.01.2013
• Date of proceeded defence: 30.01.2013
• Opponents: PhDr. Ivo Jánský

References

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Preliminary scope of work

Sovereign bond yields and credit default swaps are in the centre of attention following their increase caused by events of 2008 and rising suspicion of markets about the real explicative power of countries’ macroeconomic fundamentals. The responsiveness of capital markets to changes in credit ratings has been usually depicted on data from stock markets. However credit announcements might influence sovereign bond markets too (according to existing research). This was already shown especially in case of emerging economies. In this thesis I would like to examine the presence of this effect for the European markets and evaluate its causality, contagion power, spillover effect and persistence. Furthermore I will try to describe the means of reaction of Eastern European government bond yields to changes in Western European sovereign credit ratings. In addition we make comparison between the sensitivity of government bond yields to sovereign credit rating announcements before and after the start of recent financial crisis. We fell those findings could serve to enhance understanding of the role of rating agencies and the response to their signals in bond markets.

Preliminary scope of work in English

Sovereign bond yields and credit default swaps are in the centre of attention following their increase caused by events of 2008 and rising suspicion of markets about the real explicative power of countries’ macroeconomic fundamentals. The responsiveness of capital markets to changes in credit ratings has been usually depicted on data from stock markets. However credit announcements might influence sovereign bond markets too (according to existing research). This was already shown especially in case of emerging economies. In this thesis I would like to examine the presence of this effect for the European markets and evaluate its causality, contagion power, spillover effect and persistence. Furthermore I will try to describe the means of reaction of Eastern European government bond yields to changes in Western European sovereign credit ratings. In addition we make comparison between the sensitivity of government bond yields to sovereign credit rating announcements before and after the start of recent financial crisis. We fell those findings could serve to enhance understanding of the role of rating agencies and the response to their signals in bond markets.