Cross-border Investment in Emerging Market Bonds
Title | Cross-border Investment in Emerging Market Bonds PDF eBook |
Author | Katharina Bergant |
Publisher | |
Pages | 0 |
Release | 2023 |
Genre | Bond market |
ISBN |
We provide stylized facts on nonresident holdings of emerging market bonds and analyze the determinants of euro area investors' purchases of such securities, using a comprehensive security-level dataset that tracks net transactions of individual bonds issued by emerging market economies. Euro area investors show a preference for euro-denominated and sovereign EM bonds. Net purchases tend to be higher when the macroeconomic outlook of the respective EMs improves, and US monetary policy is loosened. Conversely, euro area investors -- in particular investment funds -- sell emerging market debt when global financial stress is high. In a case study for the BRICS countries, we find that euro area investors treat EM bonds issued through offshore affiliates differently from onshore securities, likely reflecting differences in currency composition. The sell-offs of EM debt in 2018 as well as during the Covid-19 shock only affected securities issued directly by domestic entities while euro area investors held on to securities issued through offshore affiliates.
Multi-Sector Bond Funds in Emerging Markets—Easy Come, Easy Go
Title | Multi-Sector Bond Funds in Emerging Markets—Easy Come, Easy Go PDF eBook |
Author | Fabio Cortes |
Publisher | International Monetary Fund |
Pages | 12 |
Release | 2021-12-16 |
Genre | Business & Economics |
ISBN | 1616357681 |
Unconstrained multi-sector bond funds (MSBFs) can be a source of spillovers to emerging markets and potentially exert a sizable impact on cross-border flows. MSBFs have grown their investment in emerging markets in recent years and are highly concentrated—both in their positions and their decision-making. They typically also exhibit opportunistic behavior much more so than other investment funds. Theoretically, their size, multisector mandate, and unconstrained nature allows MSBFs to be a source of financial stability in periods of wide-spread market turmoil while others sell at fire-sale prices. However, this note, building on the analysis of Cortes and Sanfilippo (2020) and incorporating data around the COVID-19 crisis, finds that MSBFs could have contributed to increase market stress in selected emerging markets. When faced with large investor redemptions during the crisis, our sample of MSBFs chose to rebalance their portfolios in a concentrated manner, raising a large proportion of cash in a few specific local currency bond markets. This may have contributed to exacerbating the relative underperformance of these local currency bond markets to broader emerging market indices.
Foreign Participation in Emerging Markets’ Local Currency Bond Markets
Title | Foreign Participation in Emerging Markets’ Local Currency Bond Markets PDF eBook |
Author | Mr.Shanaka J. Peiris |
Publisher | International Monetary Fund |
Pages | 21 |
Release | 2010-04-01 |
Genre | Business & Economics |
ISBN | 1451982607 |
This paper estimates the impact of foreign participation in determining long-term local currency government bond yields and volatility in a group of emerging markets from 2000-2009. The results of a panel data analysis of 10 emerging markets show that greater foreign participation in the domestic government bond market tends to significantly reduce long-term government yields. Moreover, greater foreign participation does not necessarily result in increased volatility in bond yields in emerging markets and, in fact, could even dampen volatility in some instances.
Correlations in Emerging Market Bonds
Title | Correlations in Emerging Market Bonds PDF eBook |
Author | Mr.A. Javier Hamann |
Publisher | International Monetary Fund |
Pages | 28 |
Release | 2010-01-01 |
Genre | Business & Economics |
ISBN | 1451961774 |
This paper examines the comovement in emerging market bond returns and disentangles the influence of external and domestic factors. The conceptual framework, set in the context of asset allocation, allows us to describe the channels through which shocks originating in a particular emerging or mature market are transmitted across countries and markets. We show that using a simple measure of cross-country correlations together with the commonly used average correlation coefficient can be more informative during episodes of heightened market instability. Data for the period 1997-2008 are analyzed for evidence of true contagion and common external shocks.
Impediments to Cross-border Investments in Asian Bonds
Title | Impediments to Cross-border Investments in Asian Bonds PDF eBook |
Author | Douglas Arner |
Publisher | Institute of Southeast Asian Studies |
Pages | 28 |
Release | 2005 |
Genre | Business & Economics |
ISBN | 9789812303615 |
Following the Asian financial crisis, the development of local currency bond markets in each of the APEC economies as well as regional bond markets has received the highest priority among financial market policy-makers. Bond markets are considered as an alternative vehicle for domestic savings mobilization and also as a critical means of mitigating the dual mismatch problems of currency and maturity. However, tangible achievements have yet to materialize. The appeal of Asian bonds as evidenced by cross-border investments is dismally insignificant. Given the limited level of market activities associated with foreign investment in Asian bonds and with the supply of local currency or foreign currency denominated bonds issued by foreign borrowers in Asia, this study is designed to identify the types of impediments to cross-border investment in Asian bonds and to propose policy recommendations.
Portfolio Investment Flows to Emerging Markets
Title | Portfolio Investment Flows to Emerging Markets PDF eBook |
Author | Sudarshan Gooptu |
Publisher | World Bank Publications |
Pages | 74 |
Release | 1993 |
Genre | |
ISBN |
Emerging Market Portfolio Flows
Title | Emerging Market Portfolio Flows PDF eBook |
Author | Mr.Serkan Arslanalp |
Publisher | International Monetary Fund |
Pages | 25 |
Release | 2015-12-17 |
Genre | Business & Economics |
ISBN | 1513559222 |
Portfolio flows to emerging markets (EMs) tend to be correlated. A possible explanation is the role global benchmarks play in allocating capital internationally, the so-called “benchmark effect.” This paper finds that benchmark-driven investors indeed play a large role in a key segment of the market—the EM local currency government bond market—, accounting for more than one third of total foreign holdings as of end-2014. We find that the prominence of these investors declined somewhat after the May 2013 taper tantrum, but remain high. This distinction is important in understanding the drivers of EM capital flows and their sensitivity to different types of shocks. In particular, a high share of benchmark-driven investors may result in capital flows that are more sensitive to global shocks and less sensitive to country factors.