Geopolitical risk and Taiwan’s government bond yields: Evidence from Nancy Pelosi’s visit

Haoran Bai, Zhiwu Hong and Linlin Niu

Finance Research Letters, 2025, vol. 78, issue C

Abstract: We investigate how geopolitical risk in the Taiwan region affects its government bond yields using a structural approach. Specifically, we examine bond yield performance during the escalation of US-China tensions following Nancy Pelosi’s visit to Taiwan in August 2022. The results show that Pelosi’s visit triggered a persistent increase in Taiwan’s bond yields and expected yields, with an initial decline in short-term risk premia, which became significantly positive after 11 months. These results imply that, as geopolitical risk intensifies, the market anticipates a rise in the cost of public debt amid declining market confidence in Taiwan’s benchmark assets.

Keywords: Taiwan Strait risk; Yield curve; Event study; Counterfactual analysis; Term structure model (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:78:y:2025:i:c:s1544612325004374

DOI: 10.1016/j.frl.2025.107174

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