scholarly journals Integration and Disintegration of EMU Government Bond Markets

Econometrics ◽  
2021 ◽  
Vol 9 (1) ◽  
pp. 13
Author(s):  
Christian Leschinski ◽  
Michelle Voges ◽  
Philipp Sibbertsen
Keyword(s):  
Long Memory ◽  
Market Integration ◽  
Debt Crisis ◽  
Bond Markets ◽  
Government Bonds ◽  
Bear Market ◽  
Memory Time ◽  
Government Bond Markets ◽  
Default Risks

It is commonly found that the markets for long-term government bonds of Economic and Monetary Union (EMU) countries were integrated prior to the EMU debt crisis. Contrasting this, we show, based on the interrelation between market integration and fractional cointegration, that there were periods of integration and disintegration that coincide with bull and bear market periods in the stock market. An econometric argument about the spectral behavior of long-memory time series leads to the conclusion that there is a stronger differentiation between bonds with different default risks. This implied the possibility of macroeconomic and fiscal divergence between the EMU countries before the crisis periods.

scholarly journals International Evidence on Extending Sovereign Debt Maturities

2021 ◽  
pp. 1.000-30.000
Author(s):  
Jens H. E. Christensen ◽  
◽  
Jose A Lopez ◽  
Paul Mussche
Keyword(s):  
Asset Management ◽  
Sovereign Debt ◽  
Yield Curve ◽  
Debt Management ◽  
Bond Markets ◽  
Foreign Government ◽  
Treasury Bond ◽  
Government Bond Markets ◽  
Dynamic Yield

Portfolio diversification is as important to debt management as it is to asset management. In this paper, we focus on diversification of sovereign debt issuance by examining the extension of the maximum maturity of issued debt. In particular, we examine the potential costs to the U.S. Treasury of introducing 50-year bonds as a financing option. Based on evidence from foreign government bond markets with such long-term debt, our results suggest that a 50-year Treasury bond would likely trade at an average yield that is at most 20 basis points above that of a 30-year bond. Our results based on extrapolations from a dynamic yield curve model using just U.S. Treasury yields are similar.

Chasing unicorns: The European single safe asset project

2018 ◽  
Vol 22 (2) ◽  
pp. 139-164 ◽  
Author(s):  
Daniela Gabor ◽  
Jakob Vestergaard
Keyword(s):  
Global Financial Crisis ◽  
Shadow Banking ◽  
Bond Markets ◽  
Government Bonds ◽  
Market Participants ◽  
Sovereign Bond ◽  
The Past ◽  
Capital Markets Union ◽  
Government Bond Markets ◽  
The Global Financial Crisis

For the past 20 years, Economic and Monetary Union (EMU) institutions have sought to engineer a single safe asset that would provide a credible store of value for capital market participants. Before 2008, the European Central Bank used shadow banking to create a single safe asset that we term shadow money, and in doing so also erased borders between Euro area government bond markets. Lacking appropriate ECB support, shadow euros could not withstand the pressures of the global financial crisis and brought down several periphery euro government bonds with them. Two new plans, the Capital Markets Union and the Sovereign Bond-Backed Securities, again turn to shadow banking, this time by using securitization to generate an entirely private safe asset or a public–private safe asset. Such plans cannot solve the enduring predicament of EMU’s bond markets architecture: that Member States have competed for investors (liquidity) since the introduction of the euro, betraying a deep hostility towards collective political solutions to the single safe asset problem. Technocratic-led, market-based initiatives need to persuade EMU states that there is little threat to their ability to issue debt in liquid markets. Without ECB interventions, market-based engineering of single safe assets runs the danger of repeatedly destabilizing national bond markets.

scholarly journals Аpplication of the EU experience of the financial systems’ transformation in the context of the debt crisis for Ukraine

2020 ◽  
Keyword(s):  
Correlation Analysis ◽  
Public Debt ◽  
Debt Crisis ◽  
Bank Loans ◽  
Financial Systems ◽  
Government Bonds ◽  
Eu Countries ◽  
Systems Transformation ◽  
The Eu

Transformation of financial systems is an extremely important process because the stability of the world economy depends on their adequacy, balance and efficiency. The financial systems of the EU countries have undergone a number of transformations, during which new mechanisms to strengthen economic governance were created. However, not all problems have been solved yet. The debt crisis has revealed existing weaknesses in the structure, thus provoking the need to strengthen the financial architecture by solving existing problems, while identifying and preventing possible future threats. The subject of research of the article is main directions of the transformation of the European financial system in the context of the debt crisis. The goal is to summarize the EU financial systems’ main directions of transformation in the context of the debt crisis and to identify the possibilities of their application for Ukraine. General scientific methods are used, such as system analysis which allowed to collect and systemize statistical data on EU countries and Ukraine for further analysis, correlation analysis and trend analysis, which allowed to determine the cumulative effect of unsecured bank loans and long-term government bonds yields of the EU countries and Ukraine on the level of their public debt. The following results were obtained: correlation analysis show the existence of correlation between unsecured bank loans and long-term government bonds yields of the EU countries and Ukraine with the level of their public debt. Conclusions: there are quite a lot of possibilities of application of the EU experience of the financial systems’ transformation for Ukraine. One of the basic is introduction of annual banks stress testing; further convergence of banking sector regulation to the requirements of Basel 3 and implementation of LCR; initiation of the process of creating a single mega regulator of the financial market.

Developing the Government Bond Market in South Korea: History, Challenges, and Implications for Asian Countries

2005 ◽  
Vol 4 (2) ◽  
pp. 91-113 ◽  
Author(s):  
Kenneth Kang ◽  
Geena Kim ◽  
Changyong Rhee
Keyword(s):  
Stock Exchange ◽  
Bond Market ◽  
Bond Markets ◽  
Government Bond ◽  
Asian Countries ◽  
Trading System ◽  
Government Bonds ◽  
The Government

The government-led development of South Korea's government bond market after the Asian financial crisis provides a case study for building local bond markets in Asia. Two steps considered particularly effective at enhancing the liquidity of the market were the reopening system and the mandatory electronic exchange trading system for benchmark issues. This study uses the micro bondtrading data of the Korea Stock Exchange to determine how these efforts enhanced the government bond market. It also analyzes a long-term challenge: with the fiscal deficit projected to return to balance, the supply of outstanding government bonds is likely to decline, reducing the overall supply of benchmark issues.

Expectations and Equilibrium in High-Grade Australian Bond Markets

2005 ◽  
Vol 08 (04) ◽  
pp. 573-592 ◽  
Author(s):  
Francis In ◽  
Jonathan A. Batten
Keyword(s):  
Risk Management ◽  
Term Structure ◽  
Bond Markets ◽  
High Grade ◽  
Government Bonds ◽  
Expectations Hypothesis ◽  
Long Run ◽  
Equilibrium Relationships ◽  
Canonical Cointegrating Regression

This paper examines the equilibrium implications of the Expectations Hypothesis of term structure to different maturities of high-grade Australian dollar denominated Eurobonds and Australian Government bonds (AGBs) using the Canonical Cointegrating Regression (CCR) technique developed by Econometrica 60 (1992) 119. Our findings provide evidence only for equilibrium relationships between each group of bonds based on credit class, but not between any of the subsets of AGBs and the Eurobonds. Furthermore, the error correction model supports theory with the most liquid, long-term 10-year AGB driving the AGB term structure, with short-term yields adjusting to movements in the long-run yields, though the opposite is true for Eurobonds. The lesson for markets is to simplify the risk management task. Managers are advised to treat portfolios of equivalent credit class separately for hedging and risk management.

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 A harmonically weighted filter for cyclical long memory processes

2021 ◽  
Author(s):  
Federico Maddanu
Keyword(s):  
Spectral Density ◽  
Long Memory ◽  
Convergence In Probability ◽  
Simulation Methods ◽  
Integrated Process ◽  
Paleoclimatic Data ◽  
Memory Time ◽  
Long Memory Processes ◽  
Short Memory ◽  
Memory Parameter

AbstractThe estimation of the long memory parameter d is a widely discussed issue in the literature. The harmonically weighted (HW) process was recently introduced for long memory time series with an unbounded spectral density at the origin. In contrast to the most famous fractionally integrated process, the HW approach does not require the estimation of the d parameter, but it may be just as able to capture long memory as the fractionally integrated model, if the sample size is not too large. Our contribution is a generalization of the HW model, denominated the Generalized harmonically weighted (GHW) process, which allows for an unbounded spectral density at $$k \ge 1$$ k ≥ 1 frequencies away from the origin. The convergence in probability of the Whittle estimator is provided for the GHW process, along with a discussion on simulation methods. Fit and forecast performances are evaluated via an empirical application on paleoclimatic data. Our main conclusion is that the above generalization is able to model long memory, as well as its classical competitor, the fractionally differenced Gegenbauer process, does. In addition, the GHW process does not require the estimation of the memory parameter, simplifying the issue of how to disentangle long memory from a (moderately persistent) short memory component. This leads to a clear advantage of our formulation over the fractional long memory approach.

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