Exploring the Role of Foreign Investors in Russia's Local Currency Government Bond (OFZ) Market

The Evolution of Public Debt Vulnerabilities In Lower Income Economies

“…But LC financing can initially increase costs-as LC financing can be more expensive than FX borrowing (the figure illustrates the historical interest rate differential and how it is expected to continue in the future)-and refinancing risks due to the general dependence on T-bills and short-term securities (the figure shows the redemption profile of Kenya). Similarly, higher nonresident participation creates greater demand for local debt securities, boosts market liquidity, improves price discovery (Bae 2012;and Arslanalp and Tsuda 2014), and reduces long-term government bond yields (Peiris 2010;and Lu and Yakovlev 2017). However, it can also increase the transmission of global shocks (Essers and others 2016; Ebeke and Kyobe 2015), raise external funding risks (Arslanalp and Tsuda 2014), and raise exchange rate and yield volatility (Ebeke and Lu 2015).…”

Nonresident holdings of domestic debt in Nigeria: Internal or external driven?

“…While several studies have examined drivers of capital flows to EMs in general (see Koepke, 2018 for a survey of the empirical literature), focus on the drivers of foreign portfolio inflows into local currency debt markets has been limited. Specifically, available studies on EMs show that greater foreign participation reduces long‐term government bond yields, without necessarily increasing yield volatility (Lu & Yakovlev, 2017; Peiris, 2010; Sánchez, 2018), although others found evidence of increased yield volatility (Ebeke & Lu, 2015; Ebeke & Kyobe, 2015). Agur, Chan, Goswami, and Sharma (2018) show that EM local‐currency sovereign bond yields co‐move with international interest rates.…”

Instruments, Investor Base, and Recent Developments in the Malaysian Government Bond Market

“…Foreign holdings often represent a high share of one segment of EM LCY bonds while having much limited presence in the remaining segments. For example, in Russia foreign investors used to dominate the tradable medium-to long-term government bonds (Lu and Yakovlev, 2017) (Figure 3). Similarly, in the case of Brazil, foreign investors at some point represented more than 70 percent of the longer term fixed-rate bonds (NTN-F) ( Figure 4).…”

“…Much has been written on the roles of foreign investors in the EM LCY government bond markets. Some analyze the impact of the foreign ownership on the level and volatility of bond yields (e.g., Peiris, 2010;and Ebeke and Lu, 2015); some explore factors that influence the foreign demand for the LCY government securities (e.g., Tsuda, 2012 and; and some investigate the roles of foreign investors in helping develop the domestic bond market (e.g., Lu and Yakovlev, 2017). However, relatively little has been written on the micro-level players that have helped to channel global liquidity into the EM fixed-income markets.…”