Global dynamics of bond co-movements: insights from the response to the US bond yields

Abstract

We investigate the impact of U.S. monetary policy on bond yields across 33 countries during the period of January 2015 to August 2023, with a focus on the COVID-19 pandemic. Employing wavelet techniques, we find significant spillover effects of U.S. interest rate adjustments on both advanced and emerging economies, particularly during the pandemic. Advanced economies tend to display stronger co-movements with the U.S. while emerging economies exhibit more volatile responses based on their financial structures and ties to the U.S. market. China demonstrates a relatively autonomous financial response compared to other countries, even during the pandemic. Our findings highlight the importance of proactive policymaking and investment strategies to mitigate adverse effects on financial stability.