1 Factors Affecting the Yields of Emerging Market Issuers In International Bond Markets: Evidence from Thailand by Jonathan Batten, Deakin University School of Accounting and Finance Burwood, Victoria 3125 Australia Fax: 61 3 9244 6283 Email: jabatten@deakin.edu.au Thomas Fetherston, University of Alabama at Birmingham School of Business Birmingham, Alabama 35294 USA Fax: 1-205-975-4428 tomfeth@uab.edu Pongsak Hoontrakul, Sasin Graduate Institute of Business Administration Chulalongkorn University, Bangkok, 10330 Thailand Fax 662 954 1690 pongsak@hoontrakul.com 30 March 2001 JEL Classification: G15 Abstract We investigate the yield spread between Thai Government bonds issued in the US domestic market and US Treasury bonds to determine the long-term equilibrium dynamics and the extent that interest rate and asset factors affect changes in credit spreads. The results suggest that the long-term equilibrium relationship holds only between Thai bonds and long-term US bonds rather than shorter or equivalent maturity bonds. Also a GARCH (1,1) specification, to accommodate the time-varying volatility structure, suggests credit spreads of Thai Government bonds are negatively related to changes in the Thai SET Index. Changes in US Treasury bonds also equally affect these spreads, albeit negatively for short-term bonds, and positively for long bonds. Acknowledgements The authors wish to thank Dr. Olarn Chaipravat of the SCB Research Institute, Professor Shigeyuki Abe, Kyoto University for helpful comments on an earlier draft of this paper. We also acknowledge the hospitality and financial support of the Sasin Graduate Institute of Business Administration, and the Faculty of Commerce of Chulalongkorn University. The authors also wish to thank Reuters Asia Ltd. and the Thai Bond Dealing Centre for providing the data used in this study.