On the predictability of emerging market sovereign credit spreads

•Country credit spread curve factors predict spreads no better than a random walk.•Global U.S. yield curve factors add predictive content to country credit spread curves.•Volatility in global and local fundamentals add further predictive content.•Emerging-market credit spreads better aligned with fundamentals post-Lehman.•Lehman wake-up call effects lessen once global financial markets regain stability.