Latin American local bond markets prove resilient

2015 ◽  
Keyword(s):  
Local Government ◽  
Latin American ◽  
Foreign Investment ◽  
Developing Economies ◽  
Emerging Market ◽  
Insurance Companies ◽  
Bond Markets ◽  
Government Bond ◽  
Content Type ◽  
Government Bond Markets

Subject Foreign investment in local government bond markets. Significance In stark contrast to the sharp declines in emerging market (EM) equity markets, down by 9.3% in dollar terms this year, the domestic government bond markets of developing economies remain relatively resilient, despite the dramatic falls in EM currencies. Latin America's main local debt markets have attracted the largest inflows of foreign investment among the main EM regions, with non-resident investors even increasing their holdings of Brazilian and Colombian domestic bonds this year in the face of declines of 46% and 23% in their respective currencies. Impacts China's latest interest rate cut on October 23 will put more pressure on many commodity-dependent EM economies. EM local government bond markets are underpinned by domestic institutional investors, such as pension funds and insurance companies. EM dollar-denominated government debt will prove more resilient than local currency bonds. However, companies with large external debts are vulnerable because of sharp falls in local currencies.

ECB's QE will buoy EM bond markets

2015 ◽  
Keyword(s):  
Interest Rates ◽  
Developing Economies ◽  
Emerging Market ◽  
Investor Sentiment ◽  
Central Banks ◽  
Capital Inflows ◽  
Bond Markets ◽  
Quantitative Easing ◽  
Content Type ◽  
Large Current

Subject Opposite forces are shaping investor sentiment towards EM assets. Significance Investor sentiment towards emerging market (EM) assets is being shaped by the conflicting forces of a strong dollar and the launch of a sovereign quantitative easing (QE) programme by the ECB. While the latter is likely to encourage investment into higher-yielding assets, such as EM debt, the former will keep the currencies of developing economies under strain, particularly those most sensitive to a rise in US interest rates due to heavier reliance on capital inflows to finance large current account deficits, such as Turkey and South Africa. Impacts EM bonds will benefit from ECB-related inflows, while the strength of the dollar will keep local currencies under strain. Higher-yielding EMs will benefit the most from the ECB's bond-buying scheme since they provide the greatest scope for 'carry trades'. The collapse in oil prices is forcing EM central banks to turn increasingly dovish, putting further strain on local currencies.

Impact of regulatory changes on government bond market liquidity

2017 ◽  
Vol 25 (3) ◽  
pp. 307-317 ◽  
Author(s):  
Hans Blommestein
Keyword(s):  
Market Liquidity ◽  
Adverse Impact ◽  
Bond Markets ◽  
Government Bond ◽  
Content Type ◽  
Market Participants ◽  
Regulatory Changes ◽  
Survey Results ◽  
Government Bond Markets ◽  
The Impact

Purpose The purpose of this study is to assess the seriousness of the impact of new regulatory factors on liquidity in government bond markets since the onset of the global financial crisis. Design/methodology/approach Questionnaires were circulated for examining the adverse impact of regulatory changes on liquidity. New evidence was presented about the adverse impact of the process of regulatory changes on market liquidity. Findings The paper presents new survey results on the adverse liquidity impact of regulations on market liquidity. Responses show that government issuers differ in their assessment on the severity of the impact of the various regulations. Determining this longer-term impact is quite complex because measures of liquidity may not only reflect the impact of regulatory changes, but also the responses by policymakers and market participants (to these regulatory changes), covering in particular the following: market transparency, trading practices, market infrastructure and other policies to promote liquidity, including by reducing unconventional monetary policy measures. Also, market dynamics may have become more complex due to responses by market participants. Practical implications Debt managers need to take into account regulations with a significant adverse influence on both market liquidity and the price discovery process. As liquidity in government bond markets also has a direct impact on funding possibilities and financing costs, funding liquidity may also be affected, especially during periods with market stress. This means that the funding strategy may need to be adapted. Originality/value The paper presents new survey results on the impact of new regulations on market liquidity. This assessment is quite complex because measures of longer-term liquidity may reflect the impact of regulatory changes and the responses by policymakers and market participants to these changes.

Virus will complicate Central Europe’s policy dilemmas

2021 ◽  
Keyword(s):  
Rule Of Law ◽  
Bond Markets ◽  
Government Bond ◽  
Bond Yields ◽  
The Czech Republic ◽  
Content Type ◽  
The Rule Of Law ◽  
Market Sentiment ◽  
Government Bond Markets ◽  
Low Levels

Significance Surging inflation across CE has coincided with a rapid worsening of current-account balances, particularly in Hungary, putting the region’s currencies under strain. It has exposed the vulnerability of CE government bond markets, with yields, particularly real yields, remaining at excessively low levels. Impacts The era of low bond yields and low currency volatility in CE may have run its course. A full-fledged CE currency crisis is unlikely: Poland, Hungary and the Czech Republic are still among the most resilient emerging markets. Hungary’s crucial elections in early 2022 will reduce the scope for fiscal tightening, making policy dilemmas more acute. EU concerns about the rule of law in Poland and Hungary threaten funds earmarked for both but have had little impact on market sentiment.

Deflation trend in Central Europe will keep rates low

2015 ◽  
Keyword(s):  
Monetary Policy ◽  
Central Europe ◽  
Investor Sentiment ◽  
Economic Conditions ◽  
Bond Markets ◽  
Government Bond ◽  
Content Type ◽  
Government Bond Markets ◽  
Low Levels ◽  
Very High

Significance The pick-up in growth contrasts markedly with the sharp falls in inflation across Central Europe (CE). With CE government bond markets under renewed pressure, monetary policy is likely to remain extremely loose as inflation struggles to rise above zero. Impacts CE is enjoying 'Goldilocks' economic conditions, with deflation requiring extremely loose monetary policy amid brisk growth. The ECB's aggressive bond-buying programme will keep yields anchored at extremely low levels, benefiting CE's local debt markets. While investor sentiment is favourable, very high foreign participation in Polish and Hungarian domestic bond markets is causing concern.

Euro-area risks remain despite Greek breakthrough

2015 ◽  
Keyword(s):  
Financial Markets ◽  
Euro Area ◽  
Bond Markets ◽  
Government Bond ◽  
Fiscal Union ◽  
Content Type ◽  
Government Bond Markets

Significance Impacts Despite a dramatic deterioration in Greece's relations with its creditors, financial markets have remained relatively unconcerned. The sharp sell-off in government bond markets since mid-April stems almost entirely from exaggerated fears about deflation, not Greece. Tensions over Greece reflect broader weaknesses in the euro-area stemming from a lack of support for political and fiscal union.

Policy risks will dog Europe's emerging markets

2016 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Latin American ◽  
Emerging Market ◽  
Government Bond ◽  
Bond Yields ◽  
Content Type ◽  
Policy Regimes ◽  
Political Risks ◽  
European Economies

Subject Political and policy risks in Emerging Europe. Significance Although the currencies and government bond yields of Central European economies remain stable, the region's equity markets are coming under increasing strain, partly because of political risk. However, strong demand for Turkish local debt suggests there is still appetite for higher-yielding emerging market (EM) bonds. Impacts The recovery in oil prices is helping underpin favourable sentiment towards EMs despite persistent vulnerabilities and risks. Waning confidence in the efficacy of monetary policy will increase investors' sensitivity to political risks in EMs. This is particularly the case if these risks undermine the credibility of countries' policy regimes. Many Latin American economies have been forced to hike interest rates to counter a surge in inflation. By contrast, historically low inflation lets Central-Eastern Europe's central banks keep monetary policy ultra-loose.

Momentum in Government-Bond Markets

CFA Digest ◽  
2013 ◽  
Vol 43 (1) ◽  
pp. 105-108
Author(s):  
Servaas Houben
Keyword(s):  
Bond Markets ◽  
Government Bond ◽  
Government Bond Markets

scholarly journals Guidance Note For Developing Government Local Currency Bond Markets

2021 ◽  
Vol 21 (001) ◽  
Author(s):  
◽  
Keyword(s):  
Technical Assistance ◽  
Developing Economies ◽  
Emerging Market ◽  
World Bank Group ◽  
Bond Markets ◽  
Sector Reform ◽  
Local Currency ◽  
Guidance Note ◽  
Financial Sector Reform ◽  
Bank Group

This guidance note was prepared by International Monetary Fund (IMF) and World Bank Group staff under a project undertaken with the support of grants from the Financial Sector Reform and Strengthening Initiative, (FIRST).The aim of the project was to deliver a report that provides emerging market and developing economies with guidance and a roadmap in developing their local currency bond markets (LCBMs). This note will also inform technical assistance missions in advising authorities on the formulation of policies to deepen LCBMs.

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