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ABSTRACT
In this article, we study the main determinants of Petrobras' credit risk, measured through asset swap spreads (ASWs) and credit default swaps (CDS), replicating the main papers on the theme and analyzing whether the two products price risk differently. Our results allow us to conclude that, curiously, firm-specific (microeconomic) variables are little or no significant to explain the discrepancy between the markets, and that a large part of the difference between them (also known as the CDS-Bond Basis) may be explained by the response of each product to macroeconomic variables. The main contribution of this article is being the first in the literature addressing the theme credit risk or liquidity of a Brazilian company, from the viewpoint of bond spreads and CDS, traded in the foreign market, besides discussing why there is a difference between them.
Keywords: asset swap spread, credit default swap, basis, bond, Petrobras.
1 INTRODUCTION
After the 2008 crisis, the international fixed-income market has been considerably expanded, mainly driven by the rapid fall in U.S. Treasuries rates. Many companies from emerging markets took advantage of the excellent time to expand their investments, with access to cheaper credit, including Brazilian companies, such as in the case of Petrobras. Among the various debt instruments available, debentures issued internationally, known as bonds, are very common and popular, given their large market and easy access to credit.
This expansion in international liquidity took place at a very timely moment for Petrobras. After the discovery of oil in the pre-salt layer, its investment plan (Annual Business and Management Plan - PNG) more than doubled, along with its indebtedness. As bonds have become the main trigger of company debt, studying the variables that most influence the risk premium (which we also name as credit spread), charged by investors who are interested in the Petrobras risk, shows to be of great value for a professional working with this kind of instrument.
In this regard, this paper aims to examine which factors influence the various credit risk markets, including bond spread and credit default swap (CDS), replicating the main studies on the subject for the specific case of Petrobras, in an attempt to analyze whether the two products price risk differently and, if so, why.
We use...