Spillover effects of external economic shocks on African sovereign bonds

African nations face growing debt and default risks owing to fiscal deficits, falling commodity prices, weakening demands, the COVID-19 pandemic, and the Russia–Ukraine War. This study constructs multiple spread systems to examine the time-varying relationships between exchange rates and bond spreads in Zambia, Nigeria, and Egypt, which represent high-, medium-, and low-risk default nations, respectively, throughout the sample period and critical times by applying the BAVRSV model. This study reveals the linkage between the exchange rate and Egypt's spread is time-varying, but static in Zambia and Nigeria. Furthermore, Zambia's spread system is less stable than those of Nigeria and Egypt, with copper, crude oil, and wheat being key intermediates, respectively. The Federal Reserve rate changes, the COVID-19, and the Russia–Ukraine conflict influence the African bond spreads at different stages. The findings highlight the sensitivity of African bond spreads to exchange rates and provide valuable insights for bond investors.