This paper explores how selective default expectations affect the pricing of sovereign bonds in a historical laboratory: the German default of the 1930s. We analyze yield differentials between identical government bonds traded across various creditor countries before and after bond market...

This article outlines two general approaches to disentangle expected defaults and anticipated devaluations from distressed sovereign spreads. The first uses affine term structure models and uncovered interest rate parity to extract a schedule between risk-neutral devaluation odds and exchange...