Currency basis term structure, cross-border investment flow, and central bank currency swap agreement

Kentaro Koyama and Sumihiro Takeda

International Review of Economics & Finance, 2023, vol. 83, issue C, 470-482

Abstract: In this study, we analyze the impact of term structure changes of currency basis on cross-border sovereign bond investment flows and that of major central banks' USD funds-supplying operations. We find that changes in short-term USD/JPY basis with less than six-month terms led to a shift in the demand between Japanese government bonds and US Treasury bonds. Results also show that the funds-supplying operations reduced currency basis with less than three-month durations. The banks’ enhanced measures in March 2020 also further reduced the currency basis.

JEL-codes: E47 E52 E58 E65 G15 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:83:y:2023:i:c:p:470-482

DOI: 10.1016/j.iref.2022.09.009

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