Emerging market spreads: Then versus now

We analyze yield spreads on sovereign bonds issued by emerging markets, using modern data from the 1990s and newly collected historical data on bonds traded in London during 1870-1913, a previous era of global capital market integration. We show that spreads today comove across emerging markets to a significantly higher degree than they did in the historical sample. Moreover, sharp changes in spreads in the 1990s tend to be mostly related to global events, whereas they were primarily related to country-specific events in 1870-1913. Although we find that fundamentals comove somewhat more strongly today than they did in the past, we conjecture that today's investors pay less attention to country-specific events than their predecessors did.