Global Financial Spillovers to Emerging Market Sovereign Bond Markets

June 26, 2015

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Format: Chicago

Christian H Ebeke, and Annette J Kyobe. Global Financial Spillovers to Emerging Market Sovereign Bond Markets, (USA: International Monetary Fund, 2015) accessed September 19, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Foreign holdings of emerging markets (EMs) government bonds have increased substantially over the last decade. While foreign participation in local-currency sovereign bond markets provides an additional source of financing and reduces sovereign yields, it raises concerns about increased sensitivity of yields to shifts in market sentiment. The analysis in this paper suggests that foreign participation and an undiversified investor base transmit global financial shocks to local-currency sovereign bond markets by increasing yield volatility and, beyond a certain threshold, amplify these spillovers. These estimates are robust to a range of econometric techniques including panel smooth threshold regression.

Subject: Bond yields, Financial institutions, Financial markets, Foreign exchange, Forward exchange rates, Public debt, Securities markets, Sovereign bonds

Keywords: Africa, Bond yield, Bond yields, EM bond markets, EM sovereign bond bond yield, EM sovereign bond yield, Financial shocks, Forward exchange rates, Global, Interest rates, Investor, Investor base, Non-linearity, Securities markets, Sovereign bond bond market, Sovereign bond market, Sovereign bonds, Spillovers, WP

Publication Details

Pages:

22
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2015/141
Stock No:

WPIEA2015141
ISBN:

9781513552750
ISSN:

1018-5941

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