We use partisan and opportunistic political business cycle (“PBC”) considerations to develop and test a framework for explaining election-period changes in credit spreads for developing country sovereign bonds. Pre-election bond spread trends are significantly linked both to the partisan orientation of incumbents facing election and to expectations of incumbent victory. Bond spreads for right-wing (leftwing) incumbents increase (decrease) as the likelihood of left-wing (right-wing) challenger victory increases. For right-wing incumbent partisan and opportunistic PBC effects bondholder risk perceptions are mutually reinforcing. For left-wing incumbents partisan PBC effects dominate bondholder risk perceptions compared to opportunistic PBC effects.http://deepblue.lib.umich.edu/bitstream/2027.42/39961/3/wp575.pd
