Clustering effects and evolution of the global major 10-year government bond market structure: A network perspective

Abstract

This paper takes the 10-year government bond yields of 40 important economies in the world as the research object, aiming to establish a global major government bond market network based on the graph approach and construct an evaluation system to understand the clustering effects of different economies in some important global financial events and the evolution of market structure. Based on the rich information provided by the minimum spanning tree and planar maximally filtered graph, our empirical research results indicate that economies in the government bond market network exhibit clustering effects due to geographical proximity and similar yield levels. The GIIPS economies in Europe formed a core cluster during the European debt crisis period and the initial stage of the COVID-19 outbreak and formed clustering effects with other high-yield economies. In the initial stage of Sino-US trade friction, the market formed the phenomenon of European-American clusters and Asia-Pacific clusters. We also observed that in the complete research interval from 2010 to 2021, Germany and Netherlands had the strongest centrality, while the two largest economies in the world, the United States and China, also maintained close connections with them in the network structure. Through the interdisciplinary graph network approach, we hope to provide an effective perspective to observe and monitor the operation of the global government bond market.