What Explains the Volatility in Pakistan’s Sovereign Bond Yields?

Mohsin Waheed Tunio

MPRA Paper from University Library of Munich, Germany

Abstract: This paper, using a combination of volatility models i.e. GARCH, TGARCH, and EGARCH, tries to explain the domestic and external factors, responsible for volatility in Pakistan’s sovereign bond yield-to-maturity of various bond tenors. The paper finds out that within domestic factors, apart from the macroeconomic fundamentals, political changes such as the one that took place in April 2022 did also significantly impact the yields. In addition to the domestic factors, the general riskiness perception of emerging market bonds as measured by Emerging Market Bond Index (EMBI) spreads does also have meaningful repercussions on the yields of Pakistani bonds. Besides, sovereign defaults in the regional economies such as Sri Lanka do also greatly influence the yields by causing an uptick in them.

Keywords: Volatility; Sovereign bonds; Yield; Eurobond; Sukuk; Spreads (search for similar items in EconPapers)
JEL-codes: B26 C01 C12 C32 C58 G12 G24 (search for similar items in EconPapers)
Date: 2023-01
New Economics Papers: this item is included in nep-fmk
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:116030

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