Political ties and the yield curve

We examine the effect of political ties with the US on sovereign yields and ratings at various horizons. We find beneficial effects across both short-and long-term yields and ratings. Specifically, we find that stronger political ties with the US affect mainly the level of the yield curve of foreign sovereign bonds. These results imply that the market perceives political ties with the US as having both near-and long-term beneficial consequences. (c) 2023 Elsevier B.V. All rights reserved.