The influence of the portuguese sovereign debt ratings on treasury bond yeilds performance
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resumo
The rating agencies are often among those accused of taking part in the sovereign debt
instability that followed the financial crisis of 2008. This work intends to empirically analyse
the influence of changes in the Portuguese sovereign debt rating, as attributed by the three main
international rating agencies (Moody’s, S&P e Fitch), in the performance of mid to long-term
treasury bond yields (2, 5 and 10 years) over the period between February 2003 and May 2012.
Using simple and multiple linear regression models, estimated through the OLS method, and
through the application of Chow’s test, the statistical evidence shows that the changes in
sovereign debt rating have a negative and significant impact on the performance of treasury
bond yields for all maturities studied and this influence is higher for the period after the
sovereign debt crisis. The evidence also show that the impact of changes in sovereign debt
rating in treasury bond yields increases with the loss of investment grade.
