Post-graduation from the original sin problem The effects of investor participation on sovereign debt markets

José Antonio Ocampo, Germán Orbegozo-Rodríguez (), Mauricio Villamizar-Villegas, Nicolás Fajardo-Baquero, Oscar Botero-Ramírez and Camilo OrozcoVanegas

Borradores de Economia from Banco de la Republica de Colombia

Abstract: We evaluate the effects of the sovereign debt structure by examining various degrees of bond market participation and diversification within different bond maturities and investor type. We use a unique Colombian panel dataset, comprised of all government bond maturities in the hands of public and private institutions during 2006-2018. For identification, we propose an instrumental variable approach, specific to each investor group. We find that an increase in non-residents’ market share of a 1 percentage point reduces bond yields by 35% and lowers volatility by 0.8%, relative to their mean values. Alternatively, we see an opposite effect for both pension funds and the banking sector. Finally, we find that market concentration makes local-currency yields more sensitive to global financial shocks. **** RESUMEN: En el presente estudio examinamos los efectos de la participación y concentración de títulos de deuda pública (TES) sobre su curva de rendimientos. Utilizamos datos panel para el caso colombiano con información sobre todas las madureces de los TES (pesos) en manos de entidades financieras tanto públicas y privadas durante el periodo 2006-2018. En los ejercicios empíricos proponemos un enfoque de variables instrumentales por tipo de inversionista: bancos, fondos de pensiones y extranjeros. Nuestros resultados indican que un incremento de un punto porcentual en la participación de extranjeros reduce el nivel y volatilidad de sus tasas en 35% y 0.8%, respectivamente frente a su nivel medio. Adicionalmente, vemos un efecto opuesto para los fondos de pensiones y para el sector bancario.

Keywords: Term structure; bond market participation; bond market concentration; bond holdings; rendimientos de tasa de interés; participación y concentración de TES; tenencia de títulos de deuda pública (search for similar items in EconPapers)
JEL-codes: E43 G01 G11 G15 (search for similar items in EconPapers)
Pages: 25
Date: 2020-04
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://doi.org/10.32468/be.1113
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to repositorio.banrep.gov.co:80 (No connection could be made because the target machine actively refused it.) (https://doi.org/10.32468/be.1113 [302 Found]--> http://repositorio.banrep.gov.co/bitstream/handle/20.500.12134/9835/be_1113.pdf)

Related works:
Working Paper: Post-graduation from the original sin problem The effects of market participation on sovereign debt markets (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bdr:borrec:1113

DOI: 10.32468/be.1113

Access Statistics for this paper

More papers in Borradores de Economia from Banco de la Republica de Colombia Cra 7 # 14-78. Contact information at EDIRC.
Bibliographic data for series maintained by Clorith Angélica Bahos Olivera ().