Abstract
AbstractThis chapter relates sharp changes in spreads on sovereign bonds of emerging economies to news articles in the London Times and the Investor’s Monthly Manual for the period 1870-1913, and to news articles in the Financial Times for the 1994-2002 period. News articles are classified into several categories (good economic news, bad economic news, news on institutional reforms, news on instability and wars, etc.). The first part of the analysis identifies the types of news that caused sharp changes in bond spreads. The second part identifies dates of sharp changes in spreads and attempts to find news items that explain them. It is shown that the relationship between news and spread changes was stronger in the period before 1913 than it is today. The category of news that matters most is instability and wars, followed by economic news. Despite the importance attached to institutional changes today, news about investor friendly reforms typically have little impact on bond spreads.
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