Global Financial Spillovers to Emerging Market Sovereign Bond Markets

Christian Ebeke and Annette Kyobe

No 2015/141, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: WP; investor; bond yield; EM sovereign bond bond yield; Financial shocks; EM bond markets; Spillovers; Non-linearity; Interest rates; investor base; EM sovereign bond yield; sovereign bond bond market; sovereign bond market; Sovereign bonds; Bond yields; Securities markets; Forward exchange rates; Global; Africa (search for similar items in EconPapers)
Pages: 22
Date: 2015-06-26
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Citations: View citations in EconPapers (30)

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