This study empirically analyzed the effects on government bond yields and CDS spreads when sovereign credit ratings were downgraded by international credit rating agencies during the global financial crisis and the European sovereign debt crisis, distinguishing between European countries and emerging market countries. The main findings are as follows. First, over the entire research period of 2003–2012, sovereign credit rating downgrades were found to increase both government bond yields and CDS spreads. Second, comparing before and after the global financial crisis and European sovereign debt crisis, government bond yields increased more when sovereign credit ratings were downgraded after the crises than before the crises. However, for CDS spreads, there was no difference in impact before and after the crises. Third, the global financial crisis simultaneously affected government bond yields in both Eurozone and emerging market countries, whereas the European sovereign debt crisis affected only Eurozone countries. During both crises, only Eurozone countries' CDS spreads were found to increase. Fourth, sovereign credit rating downgrades within investment grade resulted in smaller increases in government bond yields compared to downgrades within speculative grade or downgrades from investment grade to speculative grade. Furthermore, credit rating downgrades within speculative grade led to significantly greater increases in both government bond yields and CDS spreads. Accordingly, credit rating downgrades within investment grade are interpreted as being perceived as less risky by investors, while additional downgrades within speculative grade are perceived as considerably more risky. Fifth, in comparing the influence of different credit rating agencies, Fitch's credit rating downgrades were found to have a greater impact on both government bond yields and CDS spreads.