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Background: The COVID-19 pandemic significantly impacted the bond market in early 2020. As the pandemic unfolded, there was a surge in uncertainty and risk aversion among investors. One of the important factors used by investors when buying or investing in government bond instruments is the yield. Although considered a relatively risk-free alternative due to government guarantees, government bonds have other risks influenced by factors outside the bonds themselves. These factors include domestic and international economic conditions such as exchange rate risk, domestic and international interest rate risk, and other global events like the COVID-19 pandemic. Purpose: This research aims to analyze the factors affecting the yield of Indonesian government bonds with maturities of 5, 10, and 30 This research was conducted to identify factors that influence government bond yields using a symmetric approach with the ARDL model. Design/methodology/approach: This research was conducted to identify factors that influence government bond yields using a symmetric approach using the Autoregressive Distributed Lag (ARDL) model. These factors included the short-term interest rate, consumer price index, industrial production index, exchange rate, BI rate, stock price index, foreign exchange reserves, the Fed rate, the world oil price and US bond yields. Findings/Result: The industrial production index was found to have a significant negative effect on yields, while the stock price index was found to have a significant positive effect. There was no significant long-term effect of world oil prices on yields; the effect was only present in the short term. The COVID-19 pandemic significantly impacted yields in the short term. The impact of the COVID-19 pandemic on bond yields is related to the perception of risk regarding a country's economic uncertainty. Conclusion: Indonesian government bond yields in the long term were influenced by almost all observed variables, except for world oil prices. The impact of world oil prices and the COVID-19 pandemic was found to occur only in the short term. Foreign exchange reserves were the main factor affecting 5-year bond yields, while the exchange rate was the primary factor influencing the yields of 10- and 30-year bonds. The BI rate and the Fed rate significantly impacted all three bond yields in the long term. Investors needed to be responsive to yield fluctuations and conduct thorough risk analyses to make informed investment decisions regarding government bonds. Originality/value (State of the art): This study contributes significantly to the understanding of the dynamic and complex interactions between domestic and global economic factors that affect Indonesian government bond yields. By using the Autoregressive Distributed Lag (ARDL) methodology, this research integrates both short-term and long-term factors, focusing on multiple bond maturities (5, 10, and 30 years). [ABSTRACT FROM AUTHOR]

AbstractThe objective of this research is to assess the effect of holding government securities on the credit channel, taking into account the heterogeneity of WAEMU banks’ balance sheets. The methodology adopted to achieve this objective is VAR panel modelling, proposed by Abrigo and Love. The generalized moment method was applied to a sample of 95 commercial banks operating in the WAEMU covering the period 2000–2019. The main results show that a strong presence of government securities in banks’ balance sheets contributes to the reinforcement of the financial crowding-out effect in the WAEMU. This crowding-out effect differs from one category of bank to another. Indeed, the negative relationship between government securities and the credit channel is more pronounced among large banks, national banks and pan-African banks, in contrast to other bank categories in this Union. The results also point to an asymmetrical effect of monetary policy on the lending behaviour of WAEMU banks to private borrowers. However, the WAEMU monetary authorities should step up supervision of banks that hold a large proportion of sovereign debt on their balance sheets. The high proportion of sovereign debt on banks’ balance sheets creates situations of interdependence. This could have negative consequences on the solvency of banks and therefore on the stability of the banking system in the Union.

Understanding the relationship between risk and government bond returns is crucial for assessing the influence of risk factors on bond returns. This study investigates the dynamics of risk-taking behavior and its impact on the performance of government bonds in Indonesia. Using monthly data spanning from January 2017 to December 2021, we employ a multifactor model with GARCH analysis technique to analyze the data. The findings reveal that risk exposure exerts a negative and significant effect on government bond returns in Indonesia, while market factors also negatively and significantly influence bond returns. Conversely, the joint stock performance exhibits a positive relationship and significantly impacts returns in Indonesia.

When will members of a diaspora lend to the government in their country of origin? Diasporans make important contributions to developing countries by sending remittances and investment home. However, little is known about when and why diaspora communities are willing to invest in the governments of their country of origin. Diasporans may invest at home because of their affinity with their country of origin, whether in the form of national pride, stake in economic development, or political support. This paper investigates whether these different affinity-based motivations explain the interest of diaspora members in purchasing home country government bonds. We use a survey experiment fielded to members of the Pakistani diaspora living in the United States to investigate diaspora members' willingness to invest in home government bonds. We randomly manipulate the framing of the bond to measure heterogeneity in willingness to buy the home country government bond. We find that national pride and a stake in economic development are the strongest drivers for an individual's choice to invest in a home country bond. We corroborate these findings with follow-up interviews that reveal the resonance of appeals to national identity and developmental support. The findings have implications for the design and marketing of diaspora bonds. [ABSTRACT FROM AUTHOR]

The new lesson for banking sector came on March 10th 2023, when the bank, which had $212bn of assets, failed with spectacular speed, making it the biggest lender to collapse since the global financial crisis of 2007–2009. By loading up on long-term bonds, Silicon Valley Bank (SVB) had taken an enormous unhedged bet on interest rates staying low. That bet went wrong, leaving the bank insolvent.

Copyright of Max-Planck-Institut für Gesellschaftsforschung Discussion Papers is the property of Max Planck Institute for the Study of Societies and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

In the context of escalating military and political uncertainties, a crucial component of banking system stability is the establishment of an adequate level of resource provision – liquidity. The research aims to analyze the transmission impact of the banking system's liquidity and its structure on the volumes of financing for the real sector of the economy in the second year of the war in Ukraine. In the conditions of war and the corresponding intensification of military-political threats and uncertainties, the regulator has made numerous complex decisions and restrictions aimed at balancing the challenges with the current situation in financial markets. The research found that the banking sector of Ukraine currently accumulates a significant amount of excess liquidity and demonstrates high profitability. However, in the conditions of war, the transmission mechanism works improperly, requiring constant intervention from the regulator to balance the liquidity of the banking sector and state finances, which, in turn, affects the behavior of commercial banks and changes the structure of their asset portfolios. An analysis of the structure of active operations portfolios of the banking, corporate, and private sectors provide grounds to assert that there is no reason to expect a change in investment behavior from these groups in the perspective of the next year due to the specificity of the conditions imposed by the Ministry of Finance and the regulator. To maintain macroeconomic stability in the national economy in the conditions of martial law it is necessary to introduce conditions to reduce demand for foreign currency and, as an alternative, offer the preservation of savings solvency through simplifying access to investments in government securities for households. The low financial literacy of the population and the underdeveloped stock market in Ukraine, as well as the more complex mechanism of purchasing government bonds or military bonds compared to deposit services, make such investments by the population insignificant and limited in demand. [ABSTRACT FROM AUTHOR]

The objective of this research is to assess the effect of holding government securities on the credit channel, taking into account the heterogeneity of WAEMU banks' balance sheets. The methodology adopted to achieve this objective is VAR panel modelling, proposed by Abrigo and Love. The generalized moment method was applied to a sample of 95 commercial banks operating in the WAEMU covering the period 2000–2019. The main results show that a strong presence of government securities in banks' balance sheets contributes to the reinforcement of the financial crowding-out effect in the WAEMU. This crowding-out effect differs from one category of bank to another. Indeed, the negative relationship between government securities and the credit channel is more pronounced among large banks, national banks and pan-African banks, in contrast to other bank categories in this Union. The results also point to an asymmetrical effect of monetary policy on the lending behaviour of WAEMU banks to private borrowers. However, the WAEMU monetary authorities should step up supervision of banks that hold a large proportion of sovereign debt on their balance sheets. The high proportion of sovereign debt on banks' balance sheets creates situations of interdependence. This could have negative consequences on the solvency of banks and therefore on the stability of the banking system in the Union. Impact statement: The aim of this research is to strengthen the existing literature on the transmission mechanisms of monetary policy. This research involves several players in the economic sphere: the Central Bank, commercial banks, WAEMU member states and the private sector (businesses and households). Indeed, it will attempt to provide a solution to the monetary authorities and regulators of the WAEMU area, by contributing to the effort to develop the public securities market and improve the financing of the economies of the Union's countries. [ABSTRACT FROM AUTHOR]

State and local governments put hundreds of referendums on the ballot each year. Often, they pass but sometimes they fail. What happens after a successful or failed attempt at the ballot box? Do advocates go back to voters with another request? And if they do, do they tend to succeed? We employ a regression discontinuity empirical framework to causally estimate referendum dynamics in the arena of land conservation. Our results suggest municipalities where a referendum just barely fails hold about 0.5 more referendums and pass about 0.28 more referendums than municipalities that just barely pass, meaning initial defeat is often reversed. We also investigate whether strategic changes are made in election approaches for those that try again. We find no evidence of systematic patterns in strategic revisions for municipalities that fail their first referendum. However, when revisions are made, our evidence suggests that voters appear to respond positively. [ABSTRACT FROM AUTHOR]

We analyze the predictive ability of real‐time macroeconomic information for the yield curve of interest rates. We specify a mixed‐frequency macro‐yields model in real time that incorporates interest rate surveys and treats macroeconomic factors as unobservable components. Results indicate that real‐time macroeconomic information is helpful to predict interest rates, and that data revisions drive a superior predictive ability of revised macro data over real‐time macro data. We also find that interest rate surveys can have significant predictive power over and above real‐time macroeconomic variables. [ABSTRACT FROM AUTHOR]

The aim of the article is to study the features of the use of anti-crisis monetary instruments to support liquidity at the macro level and ensure financial stability in Ukraine in the context of the ongoing full-scale military invasion of the russian federation. The NBU is facing new challenges and tasks related to maintaining the functional capacity of banks, prudent actions aimed at supporting liquidity and financial stability of the banking system. It has already been proved that both a shortage and a surplus of liquidity can be the starting point of a shock explosion in the economy. A comparative-dynamic analysis of the main monetary indicators of the money sphere has been carried out, which has shown their dynamism, controllability, and relative stability. It is noted that in the context of the «unattainable triad», or the Mundell-Fleming trilemma, an independent monetary policy was introduced with respect to the currency, but under the influence of non-monetary factors influencing the monetary sphere, there is a twisting of the spiral of liquidity and the formation of its surplus. Transactions with government bonds and certificates of deposit, which, unlike government bonds, are not a socially useful transaction, do not always achieve the goals of ensuring financial stability and liquidity management under martial law. Monetary transmission in the government securities market does not have a positive effect due to the mandatory military spending of the government of Ukraine. For banks, these operations are a source of profitable liquidity. Due to the non-working transmission mechanism, the inconsistency of the actions of the government and the central bank, in particular, the dynamics of the interest rate does not have a stabilizing effect on the economy.

In the context of escalating military and political uncertainties, a crucial component of banking system stability is the establishment of an adequate level of resource provision – liquidity. The research aims to analyze the transmission impact of the banking system's liquidity and its structure on the volumes of financing for the real sector of the economy in the second year of the war in Ukraine. In the conditions of war and the corresponding intensification of military-political threats and uncertainties, the regulator has made numerous complex decisions and restrictions aimed at balancing the challenges with the current situation in financial markets. The research found that the banking sector of Ukraine currently accumulates a significant amount of excess liquidity and demonstrates high profitability. However, in the conditions of war, the transmission mechanism works improperly, requiring constant intervention from the regulator to balance the liquidity of the banking sector and state finances, which, in turn, affects the behavior of commercial banks and changes the structure of their asset portfolios. An analysis of the structure of active operations portfolios of the banking, corporate, and private sectors provides grounds to assert that there is no reason to expect a change in investment behavior from these groups in the perspective of the next year due to the specificity of the conditions imposed by the Ministry of Finance and the regulator. To maintain macroeconomic stability in the national economy in the conditions of martial law it is necessary to introduce conditions to reduce demand for foreign currency and, as an alternative, offer the preservation of savings solvency through simplifying access to investments in government securities for households. The low financial literacy of the population and the underdeveloped stock market in Ukraine, as well as the more complex mechanism of purchasing government bonds or military bonds compared to deposit services, make such investments by the population insignificant and limited in demand.

Given the need for transition economies to finance some of the investment required for development through borrowing, this paper empirically examines the determinants of government bond spreads, focusing on institutional quality as a contextual dimension. The literature generally assumes that market assessments of sovereign risk - i.e., the probability of default - and hence the cost of sovereign borrowing over the risk-free rate are based on the borrower’s macroeconomic fundamentals, solvency, and liquidity indicators related to fiscal and financial variables, and indicators of external financial market volatility. Using fixed effect estimation, our findings suggest that government bond spreads in European transition economies are sensitive to domestic macroeconomic fundamentals and global financial market volatility. From macroeconomic fundamentals, fiscal deficit levels, inflation rates, and countries’ effective exchange rates emerge as the leading indicators determining bond spreads over the observed period. Moreover, our results suggest that financial markets consider the quality of institutions when assessing default probabilities; hence, the potential risks arising from the quality of institutions are factored into the cost of sovereign borrowing. These results are robust to various extensions and robustness tests.

In the current operating conditions, the stock market, as a type of the financial market, occupies a significant place in ensuring the proper level of economic and financial development of each individual country. It has been considered that in Ukraine, the activity of the stock market is determined by the relevant infrastructure, which includes stock exchanges, securities traders, investment funds, companies, etc. It has been revealed that the stock market is currently in the stage of development. The quality of the infrastructure, the inconsistency of the regulatory and legal basis, the insufficiency of appropriate financial instruments, the instability of the stock market, the fragility of the financial system etc., remain the main problems, which require further solutions. Based on the example of basic indicators, the dynamics of the issue of shares and bonds, the volume of trading in financial instruments and the main types of securities, the structure of the exchange turnover of financial instruments by type of securities, as well as the volume of trading in securities on the primary and secondary stock markets for 2014-2022 have been analyzed. For the formation and stimulation of an effective and efficient stock market in Ukraine, it has been proposed to improve the mechanism for ensuring the transparency and availability of financial instruments, by strengthening state support in this context, ensuring the transparency of transactions and a certain form of protection of the investment institution by introducing certified software. Adaptation of international experience regarding the functioning of the stock market as a whole, and its components, provides an opportunity of implementing modern approaches regarding the introduction of the latest platforms, programs and other financial products, which will allow to expand the stock market operation area. [ABSTRACT FROM AUTHOR]

This paper is a theoretical contribution to the development and update of Marx's theory of money and credit, given the empirical developments in finance since the 1970s. It expands on the discussion of fictitious capital and government bonds within the Marxian literature. In contrast with most Marxian literature and some of Marx's own writings on the topic, I argue that fictitious capital does not represent any real capital and then further develop the idea that fictitious capital is the channel through which the dominance of interest-bearing capital over other forms of capital occurs. This interpretation lays the foundation for understanding why government bonds, as titles of fictitious capital, are the keystone of financial markets and an unavoidable source for both financial accumulation and exploitation, rather than being a mere consequence of state spending. For this reason, public debt can neither be avoided nor fully paid off. [ABSTRACT FROM AUTHOR]

Given the need of transition economies to fund the investments necessary for development partly through borrowing, this paper investigates empirically the economic consequences of the government cost of borrowing for European transition economies during the period 2003-2016. The investigation analyses the impact of sovereign borrowing costs, in turn, on interest rates on loans to businesses and households, on the growth rates of investment and consumption, and, ultimately, on general economic activity. By utilizing a panel VAR technique our results indicate that consequent upon a positive shock to the cost of sovereign borrowing, the cost of borrowing for loans to both Non-Financial Corporations (NFCs) and households increases. We find that the price transmission from government borrowing costs to the private sector is at play with respect not only to borrowing rates but also to macroeconomic activity at large. Following an increase in sovereign borrowing costs, we observe substantial negative responses in the growth rates of investment, household consumption, and GDP growth. Also, while a price of borrowing increase for NFCs is found to negatively affect investment, household consumption is unaffected by an increase in household borrowing rates. These findings have valuable policy implications for policymakers and stakeholders in transition economies. Specifically, the results suggest that efforts to reduce the cost of sovereign borrowing could have a positive impact on the economy by lowering borrowing costs for households and businesses, promoting investment and consumption, and ultimately boosting economic growth. [ABSTRACT FROM AUTHOR]

We explore the effects of reducing the overall size of the central bank's balance sheet and lowering its maturity structure. To do so, we consider an environment where fiscal policy is traditionally passive and the central bank follows the Taylor principle. In addition, the monetary authority has also explicit size and compositional rules regarding its balance sheet. Agents in this economy face limited commitment in some markets and government bonds can be used as collateral. When short‐ and long‐term public debt exhibit premia, changes in the central bank's balance sheet have implications for long‐run inflation and real allocations. To ensure a unique locally stable steady state, the central bank should target a low enough maturity composition of its balance sheet. In our numerical exercise, calibrated to the United States, we find that long‐term debt holdings by the central bank should be less than 0.5 times of their short‐term positions. Moreover, the process of balance sheet normalization should aggressively respond to the total debt issued in the economy relative to its target. These findings depend on the degree of liquidity of long‐term bonds. The more liquid long‐term bonds are, the lower is the value of the composition threshold and the parameter space consistent with unique and stable equilibria is smaller. In addition, we consider a modified Taylor rule that takes into account the premium. Such a rule increases the prevalence of multiplicity of steady states and delivers lower welfare. Thus, we argue that the traditional Taylor rule is appropriate for managing interest rates in the presence of premia. [ABSTRACT FROM AUTHOR]

This paper investigates whether the COVID-19 cases and death rates affect the dynamic correlation of corporate-government bond yields. Therefore, this study uses the daily corporate bond data with different ratings of bonds along with the COVID-19 data at both the US and global levels. Using the quantile regression approach, it produces the following results. First, the impact of daily cases differs from that of death rates both locally and globally. Second, the impact of local cases and death cases on the government-AAA yields correlation at a given quantile tends to reverse when the BBB bonds are used in the analysis. Third, global death rates significantly affect the correlation series the most at the higher quantiles. Lastly, AAA-rated bonds show higher sensitivity to COVID-19 cases and death rates than BBB-rated bonds. This finding indicates that relatively high-quality bonds are more susceptible to the pandemic period and thus calls for careful evaluation of assets included in investors’ portfolios. This study assumes that local COVID-19 data provide a better implication for constructing bond portfolios than global data. That is, their economic impact depends on the rating of the bond and tends to vary more across correlation quantiles.

This study analyzes whether government bonds can act as safe havens in the context of COVID-19. Using a panel fixed effect model, data were collected for both advanced and emerging market economies from March 11, 2020, to June 30, 2021. Robustness tests were used to add to the credibility of the findings. Our evidence supports that government bonds maintained their safe haven status during the COVID-19 pandemic. Hence, investors can still use government bonds to hedge financial market risks in the uncertain environment associated with this pandemic. Additionally, the negative effects of the COVID-19 pandemic on government bond yields in emerging economies are larger than in advanced economies. Therefore, policymakers' measures should focus on reducing COVID-19 cases to alleviate panic and diminish economic fluctuations, especially for emerging economies. Regulators can also use short-term interest rates to guide market capital flow to avoid a liquidity crisis, reducing financial stress and market uncertainty. [ABSTRACT FROM AUTHOR]

The text deals with certain problems of taxation in the Czech Republic of passive income from bonds, namely government bonds and Eurobonds. It follows in brief the historical development of taxation by income taxes of interest yields from bonds over the last 30 years, i.e., from the inception of the first tax system of the independent Czech Republic. It takes notice of the fluctuations of tax exemptions over the time and attempts to establish, sometimes not very discernible, reasons for the introduction and abolition of such exemptions. It criticizes the lack of stability and adherence to legal principles of the statutory regulation resulting in a potential negative impact of the same on Czech bond issuers and investors in financial markets. [ABSTRACT FROM AUTHOR]

Copyright of Zeitschrift für die gesamte Versicherungswissenschaft is the property of Springer Nature and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This paper seeks to analyze, through a partial solution of an analytical model, how the credibility of the Central Bank - that is, whether agents effectively believe that ex-post inflation will be equal to ex- -ante inflation - impacts the decision of private agents to formulate a portfolio of government bonds. The historical and empirical analysis of the Brazilian case seeks to validate the model’s results. [ABSTRACT FROM AUTHOR]

Copyright of Financial Space is the property of Cherkasy Institute of Banking, University of Banking of the National Bank of Ukraine and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

We examined co-movement between green bonds and triple-A government bonds during December 2008–November 2019. We determined that two markets followed the heavy tail dependence using Student's t-copulas. Using transfer entropy, further evidence was obtained for the causal relationship between the two markets, which was described by three categories such as 'no effect,' 'mono-direction,' and 'bi-direction'; this relationship indicated the sender and the receiver of return shocks on these markets. Our results highlight the presence of contagion risk between green bonds and prime government bonds, which has practical implications for risk management. [ABSTRACT FROM AUTHOR]

Fragmentation in the sovereign bond market of the Eurozone involves divergences in borrowing costs and undermines the stability of the monetary union. In this paper, we propose an indicator of fragmentation between government bonds of the core and peripheral European countries. Using a regime-switching cointegration model, we identify the absence of fragmentation as periods where the bond yields of the two groups share a common stochastic trend in the long-run. The results show that the indicator of fragmentation is responsive to systemic stress events and is negatively related to the ECB's monetary policy actions. • We propose an indicator of fragmentation in the sovereign bond market of the Eurozone. • We identify fragmentation via a regime-switching cointegration model. • Fragmentation increases with systemic stress events. • Fragmentation reduces with the ECB's monetary policy actions. [ABSTRACT FROM AUTHOR]