Sovereign credit default swaps premiums and bond spreads in Portugal in the aftermath of the 2008 financial crisis

Resumo / Abstract: This paper uses daily data of credit default swaps premiums and sovereign bonds spreads in Portugal to analyze the dynamics of each market in the price discovering process in the aftermath of the financial crisis. Based on the identification of structural changes and cointegration analysis we estimate Autoregressive Distributed Lag Error Correction models for the sub periods prior and after the structural change and for the 2years and 5-years maturities. Evidence for other Euro Zone countries is also provided. The results reveal the existence of cointegration between both markets over all sub periods, but the financial crisis dictated changes of the leadership in the price discovery process, which belongs to the credit default swaps market over periods of higher distress and in the longer maturity segment. This result is common to other high indebted countries which exhibit similar adjustment speeds towards long-run equilibria.

Outros seminários / Other seminars: Programa completo / Full programme.