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The Ties that Bind; Measuring International Bond Spillovers Using Inflation-Indexed Bond Yields

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Listed author(s):
  • Andrew J Swiston
  • Tamim Bayoumi

Abstract

This paper explores international bond spillovers using daily and intra-day data on yields on inflation-indexed bonds and associated inflation expectations for the United States, Australia, Canada, France, Sweden, Japan, and the United Kingdom. The analysis starts in 2002, by which point U.S. inflation-indexed markets were fully mature. Real bond yields are found to be closely linked across countries, with developments in U.S. markets determining around half of real foreign yields and no evidence of spillovers back to the United States. Spillovers in inflation expectations are smaller and the direction of causation is less clear.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/128.

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Length: 40
Date of creation: 01 Jun 2007
Handle: RePEc:imf:imfwpa:07/128
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Keywords: Inflation; Inflation-indexed bonds; Spillovers; Real interest rates; Market Efficiency; bond; bonds; real rates;

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Cited by:

  1. Winkelmann, Lars & Netsunajev, Aleksei, 2015. "International Transmissions of Inflation Expectations in a Markov Switching Structural VAR Model," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112900, Verein für Socialpolitik / German Economic Association.
  2. Tamim Bayoumi & Andrew Swiston, 2009. "Foreign Entanglements: Estimating the Source and Size of Spillovers Across Industrial Countries," IMF Staff Papers, Palgrave Macmillan, vol. 56(2), pages 353-383, June.
  3. Tamim Bayoumi & Trung T Bui, 2012. "Global Bonding; Do U.S. Bond and Equity Spillovers Dominate Global Financial Markets?," IMF Working Papers 12/298, International Monetary Fund.

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