ECB Says Markets React More to Negative Credit Rating Events
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Financial markets react more to negative sovereign credit rating announcements than positive ones, according to a European Central Bank research paper.
Analysis showed a negative rating event increases sovereign bond-yield spreads by 0.08 percentage point and credit-default swaps by 13 basis points from the day before the announcement to the day after, Antonio Afonso, Davide Furceri and Pedro Gomes wrote in a study published on the ECB’s website today. A positive event reduces yield spreads by 0.007 percentage point and default swaps by 0.9 basis point, they said.