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Analysis Of Debt Market Indicator Behaviour

Author

Listed:
  • Peter Jacobs

    (Bank Indonesia)

  • Arlyana Abubakar

    (Bank Indonesia)

  • Tora Erita Siallagan

    (Bank Indonesia)

Abstract

This paper analyze the debt market, focusing on the behavior of soverign yield and Credit Default Swap (CDS). We build several empirical models to test the factors determine these two indicators and apply them using the Indonesian and peers data. The result confirm the significance impact of foreign reserves and VIX index on the bond yield in Indonesia and its peers country. On the Composite sovereign bond, the result shows that the real effective exchange rate (REER) and the debt service ratio (DSR) significantly affect the yield, while on the corporate bond yield, the significant explanatory variables are return on equity (ROE), inflation, the current ratio (CR) and net profit margin (NPM). However, there is an anomaly where the impact of the last two variables (CR and NPM) are contrary to the theory.

Suggested Citation

  • Peter Jacobs & Arlyana Abubakar & Tora Erita Siallagan, 2011. "Analysis Of Debt Market Indicator Behaviour," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 13(3), pages 325-350, January.
    • Handle: RePEc:idn:journl:v:13:y:2011:i:3h:p:325-350
    DOI: https://doi.org/10.21098/bemp.v13i3.396
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    References listed on IDEAS

    as
    1. Peter Rowland, 2004. "The Colombian Sovereign Spread and its Determinants," Borradores de Economia 315, Banco de la Republica de Colombia.
    2. Julio Nogués & Martín Grandes, 2001. "COUNTRY RISK: Economic Policy, Contagion Effect or Political noise?," Journal of Applied Economics, Universidad del CEMA, vol. 4, pages 125-162, May.
    3. Peter Rowland, 2004. "The Colombian Sovereign Spread And Its Determinants," Borradores de Economia 3572, Banco de la Republica.
    4. Merton, Robert C, 1974. "On the Pricing of Corporate Debt: The Risk Structure of Interest Rates," Journal of Finance, American Finance Association, vol. 29(2), pages 449-470, May.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Sovereign; bond; yield; debt market; risk; corporate fundamentals;
    All these keywords.

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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