Can Macroeconomic Variables Account for the Term Structure of Sovereign Spreads? Studying the Brazilian Case

The objective of our work is to study the term structure of interest rates and thesovereign credit spreads of emerging markets. We develop a model from termstructure, credit risk and vector autoregressive models, based on the articles by Angand Piazzesi (2003) and Ang, Dong and Piazzesi (2005). Those article?s principalinnovation is to include and study the relation among macroeconomic variables andstate variables of conventional term structure models. Our contributions includesimplifying their model, propose a new estimation method, add credit risk, and showresults for Brazilian domestic and external markets.