The credit signals that matter most for sovereign bond spreads with split rating

Huong Vu, Rasha Alsakka* (Corresponding Author), Owain ap Gwilym

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

11 Citations (Scopus)


We investigate how split ratings influence the information content of credit rating events on the sovereign bond markets during 2000-2012. We find that market reactions are far stronger for negative events on the inferior ratings and for positive events on the superior ratings. Such evidence suggests aversion of market participants to the ambiguity inherent in split ratings. Sovereign credit spreads are particularly responsive to negative events by S&P (the more conservative agency in the sample). Moody's positive events have a significant impact only when Moody's assigns superior pre-event ratings compared with S&P. There is little evidence that split ratings involving Fitch have any market implication.

Original languageEnglish
Pages (from-to)174-191
Number of pages18
JournalJournal of International Money and Finance
Early online date4 Feb 2015
Publication statusPublished - 1 May 2015

Bibliographical note

We are indebted to an anonymous referee for their suggestions. We are very grateful for comments from Robert Faff, Ian Tonks, and seminar participants at the University of Bath, UK.


  • Ambiguity aversion
  • Bond spreads
  • Sovereign credit event
  • Split ratings


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