1. Do Foreign Funds Matter for Emerging Market Bond Liquidity?
- Author
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Christensen, Jens H.E., Fischer, Eric, and Shultz, Patrick
- Subjects
Financial markets ,Foreign securities -- Prices and rates ,Emerging markets ,Medium term notes ,Bonds (Securities) -- Prices and rates ,Foreign investments -- Prices and rates ,Liquidity (Finance) ,Company pricing policy ,Banking, finance and accounting industries ,Business ,Economics - Abstract
Many investors have turned to emerging market bonds seeking higher returns in the current low interest rate environment. This raises a natural question about the potential for financial instability if investors choose to sell off those bonds quickly. Studying how changes in foreign holdings of Mexican government bonds known as bonos affected their liquidity premiums provides an assessment of the risks and benefits from foreign investment in an emerging economy. Results show that the larger foreign market share of Mexican sovereign bonds tends to increase their liquidity risk premium., The current low level of interest rates in global financial markets has sent investors around the world in search of higher yields. Many have turned to emerging markets to purchase [...]
- Published
- 2018