Global Yield Curves and Sovereign Bond Market Integration

Xiaoneng Zhu and Shahidur Rahman
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Xiaoneng Zhu: Division of Economics,School of Humanities and Social Sciences, Nanyang Technological University, Singapore
Shahidur Rahman: Nanyang Technological University, Singapore

No 902, Economic Growth Centre Working Paper Series from Nanyang Technological University, School of Social Sciences, Economic Growth Centre

Abstract: We extract global yield curve factors based on the affine arbitrage-free dynamic Nelson-Siegel model. The measure of integration proposed in the paper allows time-varying partial segmentation of national and global government bond markets. It takes into account the maturity structure of yields, therefore it is consistent in time series and cross-section as well. Though global factors and country-specific factors are highly correlated, the international bond market is less integrated than one might expected based on correlation analysis or prior knowledge of investment restrictions. The difference stems from 1) the integration asymmetry of factors:level factor is more integrated than slope and curvature factors; 2) heterogeneous factors dynamics: one factors integration may accompany the segmentation of other factors. Yet the expected integration is stable over the last two decades.

Pages: 56 pages
Date: 2009-02
New Economics Papers: this item is included in nep-fmk and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:nan:wpaper:0902

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