EconPapers    
Economics at your fingertips  
 

Bond currency denomination and the yen carry trade

Christopher Candelaria, Jose Lopez and Mark Spiegel

No 2010-04, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: We examine the determinants of issuance of yen-denominated international bonds over the period from 1990 through 2010. This period was marked by low Japanese interest rates that led some investors to pursue \"carry trades,\" which consisted of funding investments in higher interest rate currencies with low interest rate, yen-denominated obligations. In principle, bond issuers that have flexibility in their funding currency could also conduct a carry-trade strategy by funding in yen during this low interest rate period. We examine the characteristics of firms who appeared to have adopted this strategy using a data set containing almost 80,000 international bond issues. Our results suggest that there was a movement towards issuing in yen in the international bond markets starting in 2003, but this appears to have ended with the outbreak of the global financial crisis in 2007. Furthermore, the breakdown of carry-trade conditions in 2007 corresponds to a resurgence in the ability of economic fundamentals, such as the volume of trade with Japan, to explain the decision to issue international bonds denominated in yen.

Keywords: bond markets; Yen, Japanese (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-ifn
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.frbsf.org/publications/economics/papers/2010/wp10-04bk.pdf (application/pdf)

Related works:
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:fip:fedfwp:2010-04

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Paper Series from Federal Reserve Bank of San Francisco Contact information at EDIRC.
Bibliographic data for series maintained by Federal Reserve Bank of San Francisco Research Library ().

 
Page updated 2024-06-19
Handle: RePEc:fip:fedfwp:2010-04