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Global dynamics of bond co-movements: insights from the response to the US bond yields using wavelet methods

Author

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  • Choi, Youngran
  • Josecliff Gladson, Eben
  • Adhikari, Hari

Abstract

We investigate the impact of U.S. monetary policy on bond yields across 33 countries during the period of January 2015 to August 2023, with a focus on the COVID-19 pandemic. Employing wavelet techniques, we find significant spillover effects of U.S. interest rate adjustments on both advanced and emerging economies, particularly during the pandemic. Advanced economies tend to display stronger co-movements with the U.S. while emerging economies exhibit more volatile responses based on their financial structures and ties to the U.S. market. China demonstrates a relatively autonomous financial response compared to other countries, even during the pandemic. Our findings highlight the importance of proactive policymaking and investment strategies to mitigate adverse effects on financial stability.

Suggested Citation

  • Choi, Youngran & Josecliff Gladson, Eben & Adhikari, Hari, 2024. "Global dynamics of bond co-movements: insights from the response to the US bond yields using wavelet methods," Finance Research Letters, Elsevier, vol. 69(PA).
    • Handle: RePEc:eee:finlet:v:69:y:2024:i:pa:s1544612324010304
    DOI: 10.1016/j.frl.2024.106000
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    Keywords

    Global bond yields; COVID-19; Wavelet analysis; Spillover effects;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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