Abstract
This research investigates the impact of sovereign credit rating
(SCR) and composite country risk on yield of Pakistan
government bonds from period 1995 to 2015. Moderating
variables added including Inflation rate, Current Account
balance, GDP rate and Spot oil prices. Co-relation and
Regression method used for analysis. From analysis of the first
research question it's clear that bond yield has negative
correlation with sovereign credit rating, inflation rate and
current account balances. Which implies that when the value of
all three variables including declined consequently value of
bond yield jumped up. While Bond yield has positive
correlation country risk. Which implies that if country is less
risky, bond yield would be reduced. It must be noted that results
are in line with many of researchers. While individual
coefficients are concerned inflation rate has significant impact
on bond yield of Pakistan. Country risk has also significant
impact on bond yield of Pakistan. These results are in line with
"Country Risk Report of Moody’s" issued on 15 August 2106.
There should be investigation about composite country risk
(Pakistan placed at higher country risk ranking). What steps
should be taken to improve the Sovereign credit rating of
Pakistan? This topic would be interest of wider audience with
respect to long term investments in bonds of Government of
Pakistan. Because of higher risk of fraud in real estate market
including scandals of DHA and poor industrial production, it’s
better for investor to invest in government bonds with minimum
level of risk as compare to corporate bonds.
Chaudhry Abdullah Imran Sahi, Abid Rasheed. (2017) Impact of sovereign credit rating and country risk on bond market of Pakistan, Paradigms , Vol 11, Issue 1.
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