Quantile-based time and frequency spillovers in sovereign CDS markets

Purpose This study aims to examine the quantile time and frequency return spillover effects in sovereign credit default swaps (CDS) premiums across nine countries. Design/methodology/approach This study uses the quantile frequency connectedness method of Chatziantoniou et al. (2022), which allows to examine the relationships between various quantiles and frequencies. The series cover the period from April 9, 2014, to February 20, 2024, based on daily frequency. Findings The findings reveal that the return total connectedness values are comparatively higher in the upper and lower quantiles than at the median quantile. Short-term dynamics contribute more significantly to overall connectedness than long-term dynamics throughout the entire period and across time scales. Mexico, South Africa and Brazil emerge as primary shock transmitters, while Australia and Italy consistently act as leading receivers under various circumstances and time periods. The impact of COVID-19 pandemic’s is particularly evident in the magnitude of the total directional connectedness and net spillover shocks to Australia. The Ukraine conflict significantly increased net connectedness, with Mexico’s and South Africa’s net spillover indices peaking at approximately +50 and +40, respectively. Originality/value Attention is directed toward examining alterations in the connections among global financial markets, particularly emphasizing the interdependency of CDS premiums across global financial markets