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Drivers Of Illiquidity In The Asean Sovereign Bond Market

Author

Listed:
  • Harald Kinateder

    (University of Passau)

  • Robert Bauer

    (University of Passau)

  • Niklas F. Wagner

    (University of Passau)

Abstract

We study illiquidity in ASEAN-5 sovereign bond markets from 2008 to 2019 by using an illiquidity measure, which is based on a proxy of the amount of arbitrage capital available in sovereign bond markets. Our analysis identifies three drivers of illiquidity in Singapore, namely economic policy uncertainty, the default spread and the GDP growth rate. In contrast, liquidity of all other markets is mostly not characterized by economic drivers. It appears that overall liquidity is lower in the markets outside Singapore and therefore deviations in these yield curves are higher on average and arbitrage eliminates larger deviations not immediately but in a delayed manner.

Suggested Citation

  • Harald Kinateder & Robert Bauer & Niklas F. Wagner, 2020. "Drivers Of Illiquidity In The Asean Sovereign Bond Market," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 23(4), pages 501-524, December.
    • Handle: RePEc:idn:journl:v:23:y:2020:i:4c:p:501-524
    DOI: https://doi.org/10.21098/bemp.v23i4.1453
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    More about this item

    Keywords

    ASEAN-5 countries; Arbitrage capital; Illiquidity; Noise measure; Sovereign bond markets;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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