This paper looks at the determinants of bond yields for a select group of Eurozone countries, during the European sovereign debt crisis. In addition to traditional determinants of spreads, which include credit risk, liquidity risk and international risk aversion, this paper looks at the role of credit rating agencies. The movements of countries’ yields during the debt crisis played an integral role in the resulting bailouts by the European Union. Using expected data published by the European Commission, the results of the model were in line with current literature, with the exception of the effect of budget deficits. One interpretation of the conflicting results is that during a debt crisis what market participants care about is growth, not austerity. Including the effect of credit ratings showed that credit ratings have high predictive power.

The thesis analyses co-movement of 10Y sovereign bond yields of 11 EU mem- bers (Greece, Spain, Portugal, Italy, France, Germany, Netherlands, Great Britain, Belgium, Sweden and Denmark) divided into the three groups (the Core of the Eurozone, the Periphery of the Eurozone, the states outside the Eurozone). In the center of attention are changes of co-movement in the crisis period, especially near the two significant dates - the fall of Lehman Brothers (15.9.2008) and the day, when increase of Greek public deficit was announced (20.10.2009). Main contribution of the thesis is usage of alternative methodol- ogy - wavelet transformation. It allows to research how co-movement changes across scales (frequencies) and through time. Wavelet coherence is used as well as wavelet bivariate and multiple correlation. The thesis brings three main findings: (1) co-movement significantly decreased in the crisis period, but the results differ in the groups, (2) co-movement significantly differs across scales, but its heterogeneity decreased in the crisis period, (3) near to the examined dates sharp and significant decrease of wavelet correlation was observable across lower scales in some states. JEL Classification C32, C49, C58, H63 Keywords Co-movement, Wavelet Transformation, Sovereign Debt Crisis, Sovereign Bond Yields,...

O objetivo desse trabalho é analisar a influência que fundamentos internos e fatores externos exercem sobre a taxa de juros nominal dos títulos soberanos de longo prazo nos países emergentes. A base de dados engloba 13 países ao longo de 33 trimestres entre 2006 e 2014. A metodologia utilizada aborda as técnicas econométricas mais recentes para tratar dados macroeconômicos. O modelo estimado é o Pooled Mean Group desenvolvido por Pesaran, Shin e Smith (1999). O modelo consegue separar as variáveis que afetam o nível de equilíbrio da taxa de juros das que exercem efeito apenas no curto prazo. Na melhor especificação apresentada, os resultados indicam que as variáveis que causam flutuações de curto prazo na taxa de juros dos países emergentes são a taxa de juros livre de risco (+0,3), a taxa de curto prazo (+0,4) e o déficit do governo americano (+0,1). Já as variáveis que afetam o nível de equilíbrio são a taxa de juros livre de risco (+0,5), a aversão ao risco dos investidores (+0,1), o saldo em conta corrente (-0,3), a inflação (+0,1), a abertura econômica (-0,04) e a dívida bruta (efeito positivo não linear). Por fim, ao analisar exclusivamente o caso brasileiro, nosso modelo indica que se o país tivesse mantido os fundamentos internos em linha com a média dos outros emergentes desde o final de 2006, o Brasil iria chegar ao final de 2014 com uma taxa de juros nominal de longo prazo de 6,1%, 6 p.p. abaixo do valor efetivamente observado que foi de 12,1%. / The aim of this study is to analyze the influence that internal fundamentals and external factors have on long-term sovereign bond yields in emerging markets. The database covers 13 countries over 33 quarters between 2006 and 2014. The methodology addresses the latest techniques to deal with macro panels, such as panel unit root and panel cointegration tests. The estimated model is the Pooled Mean Group developed by Pesaran, Shin e Smith (1999). This model can separate the variables that affect the interest rate equilibrium from the ones that only have an effect in the short-run. In the best specification presented, the results indicates that in the short-run the variables that affects the interest rates in emerging markets are the risk free interest rate (+0.3), the short term interest rate (+0.4) and the American government deficit (+0.1). The variables that affects the equilibrium level are the risk free interest rate (+0.5), risk aversion (+0.1), current account balance (-0.3), inflation (+0.1), trade openness (-0.04) and gross debt (non-linear positive effect). Finally, by examining only the Brazilian case, our model indicates that if the country had maintained the internal fundamentals in line with the average of other emerging markets since the end of 2006, Brazil would reach the end of 2014 with a long-term interest rate of 6.1%, 6 p.p. below the actual value of 12.1%.

O objetivo desse trabalho é analisar a influência que fundamentos internos e fatores externos exercem sobre a taxa de juros nominal dos títulos soberanos de longo prazo nos países emergentes. A base de dados engloba 13 países ao longo de 33 trimestres entre 2006 e 2014. A metodologia utilizada aborda as técnicas econométricas mais recentes para tratar dados macroeconômicos. O modelo estimado é o Pooled Mean Group desenvolvido por Pesaran, Shin e Smith (1999). O modelo consegue separar as variáveis que afetam o nível de equilíbrio da taxa de juros das que exercem efeito apenas no curto prazo. Na melhor especificação apresentada, os resultados indicam que as variáveis que causam flutuações de curto prazo na taxa de juros dos países emergentes são a taxa de juros livre de risco (+0,3), a taxa de curto prazo (+0,4) e o déficit do governo americano (+0,1). Já as variáveis que afetam o nível de equilíbrio são a taxa de juros livre de risco (+0,5), a aversão ao risco dos investidores (+0,1), o saldo em conta corrente (-0,3), a inflação (+0,1), a abertura econômica (-0,04) e a dívida bruta (efeito positivo não linear). Por fim, ao analisar exclusivamente o caso brasileiro, nosso modelo indica que se o país tivesse mantido os fundamentos internos em linha com a média dos outros emergentes desde o final de 2006, o Brasil iria chegar ao final de 2014 com uma taxa de juros nominal de longo prazo de 6,1%, 6 p.p. abaixo do valor efetivamente observado que foi de 12,1%. / The aim of this study is to analyze the influence that internal fundamentals and external factors have on long-term sovereign bond yields in emerging markets. The database covers 13 countries over 33 quarters between 2006 and 2014. The methodology addresses the latest techniques to deal with macro panels, such as panel unit root and panel cointegration tests. The estimated model is the Pooled Mean Group developed by Pesaran, Shin e Smith (1999). This model can separate the variables that affect the interest rate equilibrium from the ones that only have an effect in the short-run. In the best specification presented, the results indicates that in the short-run the variables that affects the interest rates in emerging markets are the risk free interest rate (+0.3), the short term interest rate (+0.4) and the American government deficit (+0.1). The variables that affects the equilibrium level are the risk free interest rate (+0.5), risk aversion (+0.1), current account balance (-0.3), inflation (+0.1), trade openness (-0.04) and gross debt (non-linear positive effect). Finally, by examining only the Brazilian case, our model indicates that if the country had maintained the internal fundamentals in line with the average of other emerging markets since the end of 2006, Brazil would reach the end of 2014 with a long-term interest rate of 6.1%, 6 p.p. below the actual value of 12.1%.