On International Integration of Emerging Sovereign Bond Markets

Author/Editor:

Itai Agur ; Melissa Chan ; Mangal Goswami ; Sunil Sharma

Publication Date:

January 24, 2018

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

The paper investigates the international integration of EM sovereign dollar-denominated and local-currency bond markets. Factor analysis is used to examine movements in sovereign bond yields and common sources of yield variation. The results suggest that EM dollar-denominated sovereign debt markets are highly integrated; a single common factor that is highly correlated with US and EU interest rates explains, on average, about 80 percent of the total variability in yields. EM sovereign local currency bond markets are not as internationally integrated, and three common factors explain about 74 percent of the total variability. But a factor highly correlated with US and EU interest rates still explains 63 percent of the yield variation accounted for by common factors. That said, there is some diversity among EM countries in the importance of common factors in affecting sovereign debt yields.

Series:

Working Paper No. 18/18

Subject:

English

Publication Date:

January 24, 2018

ISBN/ISSN:

9781484338667/1018-5941

Stock No:

WPIEA2018018

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

34

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