Bond Yields in Emerging Economies: It Matters What State You Are In

IMF Working Papers, August 1, 2012

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Investigates determinants of yields on domestically issued sovereign bonds in emerging economies.
Contrasts existing literature focused on externally issued sovereign bonds with limited analysis of domestic bond yields despite their growing relevance.

The influence of fiscal variables on domestic bond yields in emerging economies depends on the level of global risk aversion.
During tranquil times in global markets:
- Fiscal variables do not seem to be a significant determinant of domestic bond yields in emerging economies.
When market participants are on edge:
- Market participants pay greater attention to country-specific fiscal fundamentals.
- This heightened attention reveals greater alertness about default risk.

Subject: Bond yields, Emerging and frontier financial markets, Financial institutions, Financial markets, Government debt management, Public debt, Public financial management (PFM), Securities markets
Keywords: Bond Markets, bond yield, Bond yields, domestic bond yields, Emerging and frontier financial markets, emerging market, Emerging Market Economies, estimation result, Fiscal Deficit, fund assets, Global, Government debt management, growth expectation, growth projection, growth rate, long-term bond yields, Public Debt, Securities markets, WP

Disclaimer present in the source: "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."

Source: IMF Working Papers — "Bond Yields in Emerging Economies: It Matters What State You Are In" (Working Paper No. 2012/198, August 1, 2012).