Cross-Border Asset Holdings and Comovements in Sovereign Bond Markets

Hossein Asgharian, Lu Liu () and Marcus Larsson ()
Additional contact information
Lu Liu: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden, https://sites.google.com/site/luliuresearch/
Marcus Larsson: Handelsbanken, Stockholm

No 2015:30, Working Papers from Lund University, Department of Economics

Abstract: We analyze the importance of different types of asset holdings for the interdependence of the yield curves in the EMU using a spatial VAR model. We find that the cross-border holdings of long-term debt and bank lending are important for the interdependence. Our analysis of cross-sectional dispersion in sovereign-CDS-premium term structure shows that the differential in sovereign creditworthiness in the EMU is a main driver of the yield-curve divergence after 2008. The degree to which EMU countries’ yield-curve slopes depend on the US slope decreases in the recent US recession, reflecting expectations during this period about future divergence of the US and EMU economies.

Keywords: yield-curve factors; cross-border asset holding; spatial dependence; EMU; sovereign credit default swap (search for similar items in EconPapers)
JEL-codes: C31 E43 G15 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2015-10-06
New Economics Papers: this item is included in nep-mac
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http://project.nek.lu.se/publications/workpap/papers/wp15_30.pdf (application/pdf)

Related works:
Journal Article: Cross-border asset holdings and comovements in sovereign bond markets (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:lunewp:2015_030

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