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Cross-Border Asset Holdings and Comovements in Sovereign Bond Markets

Asgharian, Hossein LU ; Liu, Lu LU and Larsson, Marcus LU (2018) In Journal of International Money and Finance 86. p.189-206
Abstract
We analyze the importance of different asset holdings for the interdependence of the yield curves in the Euro area using a spatial VAR model. We find that the cross-border holdings of long-term debt and bank lending are important for the interdependence. We also find that comovement in the Euro area declines after 2008. We show that this decline is not related to the difference among countries in reacting to shocks from the US during the financial crisis. Rather, it largely reflects the segmentation between GIIPS and non-GIIPS countries. Our analysis of dispersion in sovereign-CDS-spread term structure shows that the differential in sovereign creditworthiness in the Euro area is a main driver of the yield-curve divergence after 2008.
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author
; and
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
yield-curve factors, cross-border asset holding, spatial dependence, Euro bond markets, sovereign credit default swap, E43, G15, C31
in
Journal of International Money and Finance
volume
86
pages
18 pages
publisher
Elsevier
external identifiers
  • scopus:85046816356
ISSN
0261-5606
DOI
10.1016/j.jimonfin.2018.04.010
language
English
LU publication?
yes
id
79b27502-3084-4da1-ab3b-c1e2792fc51a
date added to LUP
2018-05-02 11:32:15
date last changed
2021-08-18 01:25:03
@article{79b27502-3084-4da1-ab3b-c1e2792fc51a,
  abstract     = {We analyze the importance of different asset holdings for the interdependence of the yield curves in the Euro area using a spatial VAR model. We find that the cross-border holdings of long-term debt and bank lending are important for the interdependence. We also find that comovement in the Euro area declines after 2008. We show that this decline is not related to the difference among countries in reacting to shocks from the US during the financial crisis. Rather, it largely reflects the segmentation between GIIPS and non-GIIPS countries. Our analysis of dispersion in sovereign-CDS-spread term structure shows that the differential in sovereign creditworthiness in the Euro area is a main driver of the yield-curve divergence after 2008.},
  author       = {Asgharian, Hossein and Liu, Lu and Larsson, Marcus},
  issn         = {0261-5606},
  language     = {eng},
  pages        = {189--206},
  publisher    = {Elsevier},
  series       = {Journal of International Money and Finance},
  title        = {Cross-Border Asset Holdings and Comovements in Sovereign Bond Markets},
  url          = {http://dx.doi.org/10.1016/j.jimonfin.2018.04.010},
  doi          = {10.1016/j.jimonfin.2018.04.010},
  volume       = {86},
  year         = {2018},
}