Basis point change in sovereign spread explained by one standard deviation shock to credit and liquidity (full sample period). This figure plots the basis point change in country sovereign bond yield spreads (averaged across maturities) associated with a one standard deviation increase in the country CDS spread (x-axis) versus a one standard deviation increase in the K-spread (y-axis). Both axes are on logarithmic scales. The plotted values are based on coefficient estimates from a regression of sovereign bond yield spreads onto the K-spread and the country sovereign CDS spreads, shown in Panel A of Table 3. The country sovereign CDS spread and the K-spread standard deviations are shown in Panels A and B of Table 1. The sample period covered by the estimation is January 1, 2007 to December 31, 2014.