Term spreads and the COVID-19 pandemic: Evidence from international sovereign bond markets

Zaremba, Adam; Kizys, Renatas; Aharon, David Y.; Umar, Zaghum

doi:10.1016/j.frl.2021.102042

Cited by 62 publications

(47 citation statements)

References 41 publications

(28 reference statements)

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“…In this study, we analyze the impact of COVID-19 containment measures on bond market volatility in hard-hit countries during the pandemic. Our findings contribute to the literature on the impact of the COVID-19 outbreak on international bond markets (Arellano et al 2020;Zaremba et al 2021aZaremba et al , 2021b. Our study shows that non-pharmaceutical interventions have adverse impacts on the international bond market (Arnon et al 2020;Deb et al 2021), increasing the volatility in bond markets.…”

Section: Introductionsupporting

confidence: 62%

Responses of the International Bond Markets to COVID-19 Containment Measures

Nguyen

et al. 2022

JRFM

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Using an international sample during the COVID-19 outbreak, our study gives evidence that COVID-19 containment measures impact volatility in the international bond markets in different ways. We found that the positive effect of increasing new COVID-19 vaccinations markedly mitigates bond market volatility, while non-pharmaceutical government interventions resembling bad news increase volatility in bond markets. Besides this, changes in total COVID-19 cases and total deaths have co-movement and a significant relationship with this volatility. Our results imply that the investors’ responses to the trigger of increased uncertainty seem to differ in a way that depends on bad or good news as a reflection of the possibility of pandemic control and the health of the economy. The mass vaccinations not only signal a lower probability of stringent government responses to the pandemic but also stabilize investors’ behavior and mitigate compliance fears to open a period of safe living with coronavirus. Our findings are still robust when using alternative measures of independent variables and different forecasting models of conditional volatility.

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Section: Introductionsupporting

confidence: 62%

Responses of the International Bond Markets to COVID-19 Containment Measures

Nguyen

et al. 2022

JRFM

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“…Considering the massive economic shocks that the COVID-19 pandemic has caused worldwide, Nakamura and Managi (2020) calculate the overall relative risk of the importation and exportation of COVID-19 and assert that it is indispensable for countries to undertake countermeasures for this disease. Furthermore, the number of studies on the influence of media information on infectious diseases on investors' decisions is increasing significantly ( Umar and Gubareva, 2021a , Umar and Gubareva, 2021b , Umar et al., 2021b ; Zaremba et al, 2021 ). Cepoi (2020) and Haroon and Rizvi (2020) use the Coronavirus Media Coverage Index (MCI) to study the connectedness between the sentiment generated by news related to COVID-19 and volatility levels in different sectors of the US equity markets.…”

Section: Literature Reviewmentioning

confidence: 99%

The impact of COVID-19-related media coverage on the return and volatility connectedness of cryptocurrencies and fiat currencies

Umar

Jareño

González

2021

Technological Forecasting and Social Change

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This research explores the impact of COVID-19-related media coverage on the dynamic return and volatility connectedness of the three dominant cryptocurrencies (Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP)) and the fiat currencies of the euro, GBP and Chinese yuan. The sample period covers the first and second devasting waves of the COVID-19 pandemic crisis and ranges from January 1, 2020, to December 31, 2020. The dynamic return and volatility connectedness measures are estimated using the time varying parameter-VAR approach. Our return connectedness analysis shows that the media coverage index (only before the first wave) and the cryptocurrencies are the net transmitters of shocks while the fiat currencies are the net receivers of shocks. Similar results are obtained in terms of volatility, except for the euro, which shows a clear net receiver profile in January and February. This fiat currency (the euro) became a net transmitter in March and during the first wave of the COVID-19 crisis, which possibly shows the virulence of the pandemic on the European continent. Moreover, the most relevant differences between the net dynamic (return and volatility) connectedness of these two groups of currencies are focused on the beginning of the sample period, just before the first wave of the SARS-CoV-2 pandemic crisis, although some differences are observed during the first and second waves of the coronavirus outbreak.

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“…However, it is worth noting that the sovereign and corporate debt markets are barely addressed. The literature on fixed-income finance during the ongoing Covid-19 fueled turmoil, although rapidly developing,-see [4,[32][33][34];-is still rather scant, especially regarding the term-structures of the interest rates around the globe. The dynamics of the sovereign yield curves in the wake of…”

Section: Covid-19 Impact On Financial Marketsmentioning

confidence: 99%

“…The ongoing global coronavirus outbreak triggered an unprecedented financial and economic crisis, bringing tremendous uncertainty to all sides of human life [1][2][3][4]. Many developing and developed states have drastically restricted people´s mobility aiming to contain further advancement in the virus propagation.…”

Section: Introductionmentioning

confidence: 99%

The impact of the Covid-19 related media coverage upon the five major developing markets

2021

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This paper analyses the influence of the Covid-19 coverage by the social media upon the shape of the sovereign yield curves of the five major developing countries, namely Federative Republic of B razil, Russian Federation, Republic of India, People’s Republic of China, and the Republic of South Africa (BRICS). The coherenc e between the level, slope, and the curvature of the sovereign yield term structures and the Covid-19 medi a coverage is found to vary between low and high ranges, depending on the phases of the pandemic. The empirical estimations of the yield-curve factors a re performed by means of the Diebold–Li modified version of the Nelson–Siegel model. The intervals of low coherence reveal the capacity of the two latent factors, level and slope, to be used for creating cross-factor diversification strategies, workable under crisis conditions, as evidenced on the example of the ongoing pandemic. Diverse coherence patterns are reported on a per-country basis, highlighting a promising potential of sovereign debt investments for designing cross-country and cross-factor fixed-income strategies, capable of hedging downside risks.

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Term spreads and the COVID-19 pandemic: Evidence from international sovereign bond markets

Cited by 62 publications

References 41 publications

Responses of the International Bond Markets to COVID-19 Containment Measures

Responses of the International Bond Markets to COVID-19 Containment Measures

The impact of COVID-19-related media coverage on the return and volatility connectedness of cryptocurrencies and fiat currencies

The impact of the Covid-19 related media coverage upon the five major developing markets

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