اوراق قرضه بازارهای نوظهور شرکتهای آمریکای لاتین
Abstract
1- Introduction
2- Literature review
3- Data, econometric results and interpretation
4- Conclusion
References
Abstract
This paper studies the stochastic relationship among six Latin American countries' international bond issue risk premium. The analysis exploits a novel Corporate Emerging Markets Bond Indices (CEMBIs) database processed with a VAR-CCC model to clarify the nature of such relationships, and makes an objective interpretation of their characteristics. The countries included in the sample are Argentina, Brazil, Chile, Colombia, Mexico and Peru, and the daily observations period from May 14, 2014, through February 9, 2017. Our findings indicate that the CEMBI returns of Brazil and Mexico are the main influencers on the behavior of the other Latin American CEMBI returns. These insights are valuable to understand the diversification possibilities of CEMBI portfolios, and of interest to Latin American corporate financial managers who consider financing their firms with international bond issues, and for whom the risk premium paid by bond issues is the cost of funding.
Introduction
The quality spread of corporate bonds is defined as the excess return paid over the risk-free rate and is a sound indicator of the riskiness of the bond as an investment, but also has an obvious association with the cost of funding for the issuer. Higher spreads are equivalent to greater cost funds and, in that sense, have a significant influence over investment decisions of private firms which, in turn, have an impact on the creation of new jobs, and on other microeconomic and macroeconomic aspects. The investor and portfolio manager's interest lies in the risk, return and potential diversification benefits achieved by different combinations of corporate bond portfolios. Within that context, exploring the trends and characteristics of corporate bond spreads is an issue of great economic and financial importance. During recent decades, emerging countries' financial markets have registered significant growth and increasing sophistication at a global level, with the corporate bond segment leading, in most cases, that expansion. To have a sense of the magnitude of this growth, after the Global Financial Crisis (2008–2009) the annual issues of non-financial corporate bonds increased by a factor of more than three times during the five-year period from 2009 to 2014, a growth that easily outpaced both equity and syndicated loans (Ayala, Nedeljkovic, & Saborowski, 2015). To a large extent, the global economic recovery was supported by an extraordinarily relaxed monetary policy in the more developed countries that included not only historically low interest rates, but also an active participation of central banks in the purchase of troubled bonds, which is understandable when the most important aim is to create the conditions for aggregate demand and investment growth (Núñez Reyes, Perrotini Hernández, & López-Herrera, 2018).