NAME: DIVYA SANTOSH WARE.
ROLL NO.: 0222128.
SUBJECT: BUSINESS RESEARCH METHODOLOGY.
TOPIC: Government Securities.
Risk spilled over global treasury market in pandemic.
Fang Y, et, al (2022) says that the state-dependent local projection method was used to examine the influence of Covid-19 pandemic shocks on Treasury market volatility and risk spill overs, with an emphasis on local and global contexts. During the epidemic, emerging markets were more vulnerable to financial instability as risk receivers, according to the findings. Local pandemics shocks had the greatest influence on risk spill overs in the near run, whereas global pandemics shocks had a greater impact in the medium run due to expectations of economic collapse. The findings point to the necessity for greater international collaboration in fighting the epidemic and paying closer attention to imported financial risk.
Global and domestic economic variables affect 10-year Indian government bond yield.
Ashok Panigrahi, et, al(2022). This people used the Structural Vector Autoregression (SVAR) and Autoregressive Distributive Lag (ARDL) models to investigates the impact of global factors, macroeconomic variable and monetary policy on the 10-year Indian government bond rate. The analysis examines monthly data from January 2001 to April 2021 and finds that, consistent with Keynesian theory, monetary policy has a large impact on bond yields over the long term. The use of Index of Industrial Production (IIP) statistics rather than GDP has the least impact on bond yield. Bonds Yields rise in response to inflation shocks, whereas global factors such as oil price shocks have a long-term negative impact on bonds yields. According to the analysis, an increase in the 10-year US government bond yield corresponds to an increase in Indian government bond yield.
The failure of US treasury market regulations.
Yadav, et, al (May2021). The instability of the $21 trillion US treasury market structure is examined in this article, which is crucial in maintaining the country’s borrowing needs, financial stability, and investor demand for safe assets. The treasuries regulatory model is sufficient, with pubic scrutiny dividend across many authorities and a scant rulebook lacking basis safeguards found in other markets. Private self-regulation by tightly regulated banks and weakly regulated algorithm enterprises is likewise insufficient, as traders lack incentives to collaborate and keep markets open. The paper suggests two solutions: formalised coordination among regulators chaired by the financial stability oversight council and obligatory clearing for treasury trading which forces traders to monitor risks. The goal is to strengthen public and private monitoring and mitigate hazards.
Indonesia Government Bond Market.
Sulistiono, et, al (June 2019). This paper aims to investigate the relationships among the CDS, the government bond yield, the ownership of foreign investors in government bonds, and the exchange rate between IDR and the US dollar. It also compares the relationships among the observable variables in two different periods: the full period of observation from 2008 to 2013 and the sub period when the subprime mortgage crisis happened in 2008. Government continues its efforts to socialise government bonds to the general public and consider providing incentives to individual domestic investors. The proportion of government and corporate Islamic securities in the outstanding Indonesian domestic bond market at the end of 2013 is still fairly low. To improve liquidity and diversify the investment base, the government should build an Islamic financial system.
Correlations in bond market between US and other countries.
Chun-Chieh Yeha , et, al (2021). The study examines the correlation of bond markets between developed countries and emerging countries. The wavelet method provides better measures for the dynamic correlations of government bond yields between US and emerging countries revealing structural changes on the time frequency basis with wavelet coherency and phase differences. It finds that there are significant positive correlations between them and that US government bond lead every emerging country government bond over the time scales. The findings remind international investors of the reduced benefits of diversification on global bond investment portfolios and paying greater attention to the influences of the US government bond market.
Are Gold and Government Bond Safe-Haven Assets? An External Quantile Regression Analysis.
Liu, et, al (June 2020). This study compares the functions of gold and government bonds as SHAs in 16 international markets over the past 20 years. The empirical analysis is based on the EQR by Chernozhukov (2005) and Fernandez-Val (2011), and the interpretation is based on the 90% estimate interval of the coefficient estimates. The outcomes indicate that government bonds and gold are more likely to increase and preserve value, respectively, during critical market moments. However, neither assets can be qualified as a SHA at the extremal 0.001 quantile level. In terms of market selection US and Singapore are the top two choices for SHA investment. France and Hungry are the least recommended markets due to their higher number of SHA unqualifies in their gold markets. These conclusions are contingent on markets, assets class and quantile levels and are helpful for assets management during extreme market turmoil.
Treasury Bond Illiquidity and Global Equity Returns.
Goyenko, et, al (2014). We found an economically and statistically significant illiquidity premium of U.S. Treasuries in global equity markets, using market-level data from 46 countries over the 34-year period from 1977 to 2010. This paper shows that the illiquidity of U.S. Treasuries has a predictive and contemporaneous relation to stock market returns around the world. The evidence suggests that Treasury bond illiquidity reflects U.S. monetary and macroeconomic shocks and transmits these effects into global stock returns. Two propagation channels need to be understood to better understand the impact of U.S. macroeconomic shocks on global equities.
Liquidity risk and corporate bond yield spread: Evidence from China.
Chen, Y., et, al (2021). Liquidity risk accounts for a smaller portion of corporate bond spread in China, but developed markets have better liquidity and less pre-issuance restriction. This paper investigates the Chinese corporate bond spread and its liquidity risk component. It finds that liquidity risk imposes a significant effect on corporate bond pricing, with default risk playing an outsized role. Determinants of corporate bond spread include bond credit ratings, accounting performance, 10-year treasury bond yield, and state ownership. Chinese corporate bonds and state-ownership can lead to a lower liquidity spread. Policy recommendations include reducing default cost and macro-prudential policy should focus more on default risk to stabilize the fixed-income markets. Liquidity is improving and market participants are weighing more on liquidity when pricing corporate bonds.
Intra-Industry spill-over effect of default: Evidence from China Bond Market.
Hu, Xiaolu, et, al (2021). The intra-industry spill-over effect of defaults in the Chinese bond market is stronger for low-competition and regulated industries, but better information access and higher bond liquidity alleviate the effect. The Chinese onshore bond market has grown rapidly in the past two decades, making it the second largest fixed income market after the US. Combined with a fragile economic recovery from the COVID-19 pandemic, S&P Global Ratings warns that corporate default risks are at record high in China’s credit bond market towards the end of 2020. This paper explores the intra-industry spill-over effect of default in the Chinese bond market, using a sample of public corporate debt securities issued in 2006–2018. The bond default rate in the Chinese debt market is 0.87 percent by debt issues and 1.79 percent by debt issuers, compared to an average annual default rate of 1.27 percent in the global debt market.
Predicting Bond Returns: 70 years of International Evidence.
Baltussen, et, al (2021). We use 70 years of international data from major bond markets to examine bond return predictability. Results show economically strong and statistically significant predictability, robust over markets and time periods, and not explained by market or macroeconomic risks. These results are relevant for academics and practitioners. We found strong, robust, and persistent evidence of government bond return predictability in a deep sample spanning 70 years of international data across major developed bond markets. Economic profits were found to be sizable, with a global Sharpe ratio of 0.87 since 1950. No evidence of out-of-sample decay of bond market predictability over a 30-year sample period between 1950 and 1980 or in nine additional government bond markets. These results suggest that bond return predictability is a persistent empirical phenomenon not driven by Type I errors, data mining, or p-hacking effects.
So, I would like to summarize all the research papers that the collection of several papers and studies on various topics related to Government securities. Some of the topics covered include the risk spilled over the global in pandemic, correlation of bond market in US, research study on Indonesia bond market and some of the evidence from China bond market on Intra-industry spill over effect. These studies highlight the importance of various government securities and the reason to crash in various countries of the world. There were various types of methods to collect data, ways for hypothesis and most of the data covered was a long period data i.e., for 12-15 years of data was used for conducting the research. Overall, the text covered over here is a broad overview on government securities in some of the countries in the globe.
Baltussen, G., Martens, M., & Penninga, O. (2021). Predicting Bond Returns: 70 Years of International Evidence. Financial Analysts Journal, 77(3), 133–155. https://doi.org/10.1080/0015198X.2021.1908775
Chen, Y., & Jiang, L. (2021). Liquidity risk and corporate bond yield spread: Evidence from China. International Review of Finance, 21(4), 1117–1151. https://doi.org/10.1111/irfi.12322
Fang, Y., Wang, Y., & Zhao, Y. (2022). Risk Spillover of Global Treasury Bond Markets in the Time of COVID-19 Pandemic. Emerging Markets Finance & Trade, 58(15), 4309–4320. https://doi.org/10.1080/1540496X.2022.2069488
Goyenko, R., & Sarkissian, S. (2014). Treasury Bond Illiquidity and Global Equity Returns. Journal of Financial & Quantitative Analysis, 49(5/6), 1227–1253. https://doi.org/10.1017/S0022109014000362
Hu, X., Luo, H., Xu, Z., & Li, J. (2021). Intra‐industry spill‐over effect of default: Evidence from the Chinese bond market. Accounting & Finance, 61(3), 4703–4740. https://doi.org/10.1111/acfi.12745
Liu, W. (2020). Are Gold and Government Bond Safe‐Haven Assets? An Extremal Quantile Regression Analysis. International Review of Finance, 20(2), 451–483. https://doi.org/10.1111/irfi.12232
Panigrahi, A., Sisodia, M., & Vachhani, K. (2022). Impact of Global and Domestic Economic Variables on 10-Year Indian Government Bond Yield: An Empirical Study. IUP Journal of Applied Finance, 28(2), 5–23.
SULISTIONO, A. P., & ISHIDA, M. (2019). Finding the Driver: A Case Study of Indonesian Government Bond Market. Singapore Economic Review, 64(3), 543–574. https://doi.org/10.1142/S0217590816500193
Yadav, Y. (2021). The Failed Regulation of U.S. Treasury Markets. Columbia Law Review, 121(4), 1173–1250.
Yeh, C.-C., Chiu, C.-L., & Chang, T. (2021). Dynamic correlations in bond markets between US and emerging countries. Applied Economics Letters, 28(16), 1371–1376. https://doi.org/10.1080/13504851.2020.1817303