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

Author

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  • Bao Cong Nguyen To

    (School of Finance, University of Economics Ho Chi Minh City (UEH), Ho Chi Minh City 70000, Vietnam)

  • Tam Van Thien Nguyen

    (School of Finance, University of Economics Ho Chi Minh City (UEH), Ho Chi Minh City 70000, Vietnam)

  • Nham Thi Hong Nguyen

    (School of Finance, University of Economics Ho Chi Minh City (UEH), Ho Chi Minh City 70000, Vietnam)

  • Hoai Thu Ho

    (School of Finance, University of Economics Ho Chi Minh City (UEH), Ho Chi Minh City 70000, Vietnam)

Abstract

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.

Suggested Citation

  • Bao Cong Nguyen To & Tam Van Thien Nguyen & Nham Thi Hong Nguyen & Hoai Thu Ho, 2022. "Responses of the International Bond Markets to COVID-19 Containment Measures," JRFM, MDPI, vol. 15(3), pages 1-11, March.
  • Handle: RePEc:gam:jjrfmx:v:15:y:2022:i:3:p:127-:d:766135
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