Abstract
This study investigates the risk premia of foreign issuers of debt in the U.S. capital market. The results are consistent with prior empirical work on foreign issues and support the market congestion hypothesis. Canadian government issuers pay a risk markup premium, on their foreign issues, over U.S. domestic rates based on the level of foreign interest rates, foreign exchange rates, and volatility; plus there is a maturity premium for higher inflation prospects and lower growth. The foreign debt issuance by Canadian governments indicates that additional risk premiums are charged for economic uncertainty, but these are partially offset by the access to a larger capital market.
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