Download or read book Sovereign Bond Prices, Haircuts and Maturity written by Mr.Tamon Asonuma and published by International Monetary Fund. This book was released on 2017-05-22 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: Rejecting a common assumption in the sovereign debt literature, we document that creditor losses (“haircuts”) during sovereign restructuring episodes are asymmetric across debt instruments. We code a comprehensive dataset on instrument-specific haircuts for 28 debt restructurings with private creditors in 1999–2015 and find that haircuts on shorter-term debt are larger than those on debt of longer maturity. In a standard asset pricing model, we show that increasing short-run default risk in the run-up to a restructuring episode can explain the stylized fact. The data confirms the predicted relation between perceived default risk, bond prices, and haircuts by maturity.