Abstract
We investigate the yield spread between Thai Government bonds issued in the US domestic market and US Treasury bonds to determine the long-term equilibrium dynamics and the extent that interest rate and asset factors affect changes in credit spreads. The results suggest that the long-term equilibrium relationship holds only between Thai bonds and long-term US bonds rather than shorter or equivalent maturity bonds. Also a GARCH (1,1) specification, to accommodate the time-varying volatility structure, suggests credit spreads of Thai Government bonds are negatively related to changes in the Thai SET Index. Changes in US Treasury bonds also equally affect these spreads, albeit negatively for short-term bonds, and positively for long bonds.
Published Version
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