DRIVERS OF ILLIQUIDITY IN THE ASEAN SOVEREIGN BOND MARKET

Harald Kinateder (), Robert Bauer () and Niklas F. Wagner ()
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Harald Kinateder: University of Passau
Robert Bauer: University of Passau
Niklas F. Wagner: University of Passau

Bulletin of Monetary Economics and Banking, 2020, vol. 23, issue 4, 501-524

Abstract: We study illiquidity in ASEAN-5 sovereign bond markets from 2008 to 2019 by using an illiquidity measure, which is based on a proxy of the amount of arbitrage capital available in sovereign bond markets. Our analysis identifies three drivers of illiquidity in Singapore, namely economic policy uncertainty, the default spread and the GDP growth rate. In contrast, liquidity of all other markets is mostly not characterized by economic drivers. It appears that overall liquidity is lower in the markets outside Singapore and therefore deviations in these yield curves are higher on average and arbitrage eliminates larger deviations not immediately but in a delayed manner.

Keywords: ASEAN-5 countries; Arbitrage capital; Illiquidity; Noise measure; Sovereign bond markets (search for similar items in EconPapers)
JEL-codes: G12 G15 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:23:y:2020:i:4c:p:501-524

DOI: 10.21098/bemp.v23i4.1453

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