The impact of financial uncertainty on the price dynamics of global bond funds

This study examines how financial uncertainty shocks shape global bond funds’ return and volatility dynamics focusing on four key indicators: equity market volatility (VIX), bond market volatility (MOVE), central bank digital currency uncertainty (CBDCU) and geopolitical risk (GPR). Using weekly data from 2015 to 2024 across four major global bond funds (BNDX, TPINX, MGBIX and FGBFX), we employ a multi-method empirical framework that integrates TVP-SV-VAR, BEKK-multivariate generalised autoregressive conditional heteroscedasticity (MGARCH), CCC-MGARCH and wavelet quantile regression to capture time variation, volatility spillovers and distributional effects. The findings reveal heterogeneous and asymmetric responses to uncertainty shocks wherein MOVE and GPR exert persistent volatility effects, VIX generates short-term flight-to-safety flows and CBDCU introduces asymmetric risks through safe-haven dynamics and disintermediation. Fund behaviour is highly conditional—BNDX demonstrates temporary safe-haven behaviour under digital monetary shocks, MGBIX provides long-term diversification benefits, FGBFX serves as a conditional safe haven and TPINX disproportionately transmits shocks due to its emerging market (EM)/high-yield exposure. These results challenge the perception of global bond funds as uniformly defensive assets and underscore the importance of aligning fund selection with uncertainty source and investment horizon. Beyond investment insights, this study has relevant policy implications, indicating how CBDCU can be incorporated into regulatory stress tests, EM-focused funds require closer macro-prudential monitoring and policymakers should adapt liquidity and duration risk frameworks to evolving sources of systemic uncertainty.