Global Bond Market Research Articles

An Empirical Assessment of India’s Position in Global Sustainable Bond Market

This study aims to examine India's position in the global green bond market and identify areas for improvement to develop its sustainable finance sector. Analysing data from the Luxembourg Green Exchange (1999-2024) and Indian market sources, including Securities and Exchange Board of India, National Stock Exchange, and Climate Bond Initiatives. Findings reveal that green bonds dominate the global market, with the Luxembourg Green Exchange showing the highest variability in bond coupons and maturity durations. In India, the private sector holds a significant 84% market share, with companies issuing various sustainable bonds. However, challenges persist, including lack of standardisation, limited investor awareness, and inadequate disclosure and reporting standards. Research findings have implications for policymakers, investors, and issuers, emphasising the importance of a supportive ecosystem for sustainable finance to flourish in India. Addressing the challenges and leveraging opportunities can help India unlock the full potential of its green bond market and contribute to global sustainable finance efforts. This study contributes to understanding India's green bond market and its potential for growth, highlighting the need for increased standardisation, transparency, and alignment with national and international best practices to develop India's sustainable finance sector.Copyright© 2024 The Author(s). This article is distributed under the terms of the license CC-BY 4.0., which permits any further distribution in any medium, provided the original work is properly cited.

Digital Green Finance Architecture in the Context of Green Deal Implementation: Modern Fintech Tools and Solutions Under the Sustainable Development Concept

Objective: The purpose of the article is to develop a scientific and applied toolkit, which is a set of a logically informationally and algorithmically interconnected means of the information-analytical support of green financing within the Green Deal under the sustainable development concept. Theoretical Framework: The study is based on the Paris Climate Agreement, the European Green Agreement, and the concept of sustainable development. Method: To achieve the defined goal and solve the set tasks, a system of general scientific and special research methods was used. Results and Discussion: The author’s vision of the ecosystem model of the green financing is presented. The main trends of the global green bond market are identified; the parameters of the digital financing markets are estimated. The management decisions on accelerating the capital attraction and activation of green financing, ensuring the balance of the regional financing opportunities in the face of the global challenges are systematized. Research Implications: The important role of the state impact on the creation of the favourable conditions for the climate finance expansion by reducing the political, regulatory, control, macroeconomic and business risks has been established. It was established that the political stability, the consistent and clear regulatory framework, the agreed green financing policy and the openness to the international investors create the attractive conditions for the climate finance conditions. Originality/Value: Applying the author’s developments will create a basis for making the substantiated managerial decisions to the accelerated involvement of the capital in the green financing under the sustainable development concept.

Global equity, commodities and bond market response to Israel-Hamas war

This study used event study methodology to examine the impact of Hamas’ terrorist attack against Israel in global equity, commodities, and bond markets. The results show that negative abnormal returns in global equity markets are limited to the Middle East region. The major world economies - China, Europe and the US, present insignificant abnormal returns. The increase in geopolitical risk, however, brings good news for commodities and bonds that observe significant positive abnormal returns with the intensification of the conflict. This result means that bonds and commodities are a hedge against stocks on average and a safe haven against conflict risk.

How Financial Risk Affects Indonesia Sovereign Sukuk Market Development

Global bond market attention is starting to witness very interesting developments in the development of Sukuk. However, the academic literature on the determinants of the development of the Sukuk market is still new and very limited. Using the Vector Autoregression (VAR)/Vector Error Correction Model (VECM) method, this study examines how the financial risk component influences the development of the Indonesian sovereign Sukuk market. Data was collected from Bank Indonesia and Indonesia’s Directorate General of Financing and Risk Management on the External Debt Statistics database for ten years from 2013Q1-2023Q1. The results of this study indicate that the foreign Debt Service Ratio (DSR) and Exchange Rate (EXC) significantly affect the development of the sovereign Sukuk Market. The foreign DSR has a negative effect, while the EXC positively affects the development of the sovereign Sukuk market. Meanwhile, the ratio of foreign debt to Gross Domestic Product (GDP) has an insignificant effect on the development of the sovereign Sukuk Market. The findings advocate policymakers in Indonesia on the importance of strengthening financial stability and regulating the issuance of Sukuk in accordance with the associated financial risks to develop the Sukuk market properly.

Inflation Expectations, Liquidity Premia and Global Spillovers in Japanese Bond Markets

We provide market-based estimates of Japanese inflation expectations using an arbitrage-free dynamic term structure model of nominal and real yields that accounts for liquidity premia and the deflation protection afforded by Japanese inflation-indexed bonds, known as JGBi’s. We find that JGBi liquidity premia exhibit significant variation, and even switch sign. Properly accounting for them significantly lowers the estimated value of the indexed bonds’ deflation protection and affects inflation risk premium estimates. After liquidity adjustment, long-term Japanese inflation expectations have remained relatively stable at levels modestly exceeding one percent during the pandemic period. We then utilize our estimated liquidity measure to confirm the existence of statistically significant and economically meaningful spillovers to the JGBi market from global bond market illiquidity, as proxied by periods of low U.S. Treasury market depth.

Geopolitical risk and global green bond market growth

AbstractUsing individual transaction data, we investigate how geopolitical risk influences green bond issuance across 73 countries during 2008–2021. We consider deal characteristics, as well as economic and institutional factors. We find a positive association between geopolitical risk and green bond issuance. The effect shows nonlinearity and time delays. Our findings remain robust after conducting sensitivity and endogeneity analysis. After decomposing the geopolitical risk index, we discover that all its components have positive correlations with green bond issuance. Lastly, our study highlights the crucial role of the underwriters' network and specific geopolitical jurisdictions as drivers for global green bond market expansion.

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

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.

The positive impact of increased government bailout on weakening corporate default risk

Abstract Along with the increasing uncertainty of the global economy and the spread of the new crown pneumonia epidemic, the risk challenges to economic development have increased significantly, and the risk of corporate debt defaults has become more pronounced. As an important component of the capital market, the bond market also began to experience credit bond defaults during this period. Since 2021 the global bond market has shown a sharp increase in defaults, with the default rate of non-state enterprise bonds significantly higher than the overall market, and the capital market has also ushered in a period of pain and accelerated credit risk release. Enterprises are on the verge of bankruptcy restructuring and urgently need the government to provide a bailout and stabilize the market. Therefore, this paper uses the financial data of Chinese listed companies from 2016-2021, constructs a relief intensity variable using the equity pledge rate of listed companies before the relief (2021), and empirically analyzes the impact of local government relief and financing cost on the default risk of listed companies using an intensity double difference model. The results of this study show that: (1) local government bailout significantly reduces the default rate of listed companies by 13%; (2) the effect of local government bailout varies significantly depending on whether listed companies have connected transactions with financing platform companies, and the increase of bailout intensity increases the return on assets of listed companies with related transactions with financing platform companies by 9.8%, which laterally reduces the default rate of corporate debt; (3) the cost of financing is an important mechanism by which local government bailouts affect the credit default rate of listed companies, with a regression correlation of 0.75; (4) the above effect is more pronounced in regions with a higher degree of marketization, with a 9% increase in the effect. The findings of this paper are important for actively managing the risk of dual corporate debt and credit defaults and enhancing the effectiveness of macroeconomic regulation during the epidemic period.

Contemporary trends on global corporate ESG bond market

Aim. The presented study aims to identify current trends in the global corporate bond market with environmental, social, and management objectives of the issuance of ESG bond and to assess the prospects for their development.Tasks. The author analyzes the segments of the global ESG bond market; determines the causes of the emerging trends and their impact on the state of global ESG financing.Methods. This study uses general scientific methods of cognition, in particular induction and deduction, synthesis, comparative and retrospective analysis. The fundamental regulatory documents of ESG bond taxonomy are investigated, and statistics from representative sources are analyzed. The latter include International Capital Market Association, SPGlobal, Barclays, Goldman Sachs, Refinitiv, and Climate Bond Initiative.Results. Based on the conducted research, the reasons for the active growth in 2021 and the slowdown in the development of the global ESG bond market in 2022 are established, and its short-term prospects are assessed. The prospects are systematized according to ESG bond varieties. Analysis of the mutual influence of global trends on the state of the global ESG bond market indicates the prevalence of external factors.Conclusions. According to the results of the analysis, the ESG bond toolkit seems to be investment-relevant. In 2022, major discussions regarding global ESG debt revolved around market quality and potential greenwashing. Intensive measures are taken in these areas at the macro and micro levels. The volume of ESG bond issuance in 2023 should be restored as interest rates in developed countries stabilize and global inflation rates decrease. Experts remain positive in their expectations and forecasts for 2023, but the quality of green bond and bond related to sustainable development is alarming.

Research on the Corporate Bond Risk Factors

The global bond market is greater than the global equity market meanwhile it grows gradually in recent years. Issuing corporate bonds is an ideal channel for enterprises to raise funds in the course of COVID-19 and also provides resilience in the market. Moody's, Standard & Poor's and Fitch are well-known global credit rating agencies and suggest investors purchasing investment-grade bonds for reasonable risks and returns. But local credit rating agencies have limited capacities to appraise local bonds. In the COVID-19 crisis, widen yield spreads represent likelihood of default which can be a measure of credit risk. Besides, government interventions (i.e., Quantitative Easing Program) can effectively eliminate credit risks and Confucian culture is a factor in assessing credit risks of corporate bonds. As for liquidity risk, Chinese bond market is less liquid than the US bond market and financial bonds are the most liquid in the Chinese market. The liquidity risk is caused by inaccurate information and market risk tolerance whereas market risk tolerance integrates credit and liquidity, the main measurement of liquidity risk is transaction cost which means that higher transaction cost can impede liquidity in the bond market. Finally, market risk comprises of COVID-19 pandemic, market design and biodiversity risk. The epidemic tightens the financial condition of developing countries and depreciates the currency of the bond market which raises term structure of interest rate up. A well-designed financial market system can help stabilize fluctuations during financial crisis. Besides, biodiversity risk is relevant to the operation apartment of companies.

The determinants of stock–bond return correlations

AbstractI study the options‐implied market risks that affect US stock–bond correlations from 2007 to 2021. I discover that US stock and bond market uncertainty, stock market tail risk, and global credit‐default risk are dominant contributors to changing stock–bond correlations during the global financial crisis (GFC) period. However, these market risks collectively contribute much less to time‐varying correlations in the post‐GFC period. Furthermore, stock–bond correlations rise in times of rising US and global bond market risks. Rising stock market uncertainty raises stock–bond correlations in the GFC period but lowers them in the post‐GFC period. My results disentangle the risks of stock and bond markets and show that equity tail risk, bond market risk, and stock market uncertainty are dominant factors in changing stock–bond diversification benefits in periods of market turmoil.

Green financing in Kazakhstan: current state and prospects

The purpose of this article is to assess the current state of green finance in Kazakhstan and build proposals for further development. The methodological basis of the scientific article was the general scientific methods of systematization of theoretical data, methods of scientific observation of economic processes, structural-logical and system analysis. Based on the study of the theoretical aspects of green financing and the analysis of structural programs and the legislative framework, the conceptual features of the Kazakh model of green financing were identified. The analysis tool was a statistical study of the financial market of Kazakhstan. A comparative analysis of the state of the green bond market was carried out on the basis of two parameters of the Climate Bond Initiative (CBI) database: the Green bond database of the Climate Bond Initiative (GBDB), the database of social bonds and sustainable development bonds (SSBD). The CBI statistical data formed on the basis of the study due to the fact that this organization determines the rating of green securities and makes a listing of issuers, and is also the main source of collecting and distributing information about green financial instruments on a global scale, especially about green bonds and certification. Statistical data were selected for 2021, as the issue of green securities in Kazakhstan began that year, and the country entered the world system as an accredited member and prospective partner of the global green bond market. The main result is the identification of current global trends in the development of green finance in Kazakhstan. Conclusions were drawn that the study and implementation of best practices in the field of green finance in the republic has been developed thanks to strong state support. The research proposed in the article can assist researchers in formulating research problems related to green finance.

Institutional Investors’ Willingness to Pay for Green Bonds: A Case for Shanghai

The issuance of green bonds has been increasing since 2016 in China, and the number of papers covering the topic is growing. In previous studies on greenium, not much has been investigated from the institutional investors’ perspective. The study estimates the institutional investors’ level of greenium by surveying the institutional investors in Shanghai, China, from October 23 to 1 November 2021, using the double-bound dichotomous choice (DBDC) contingent valuation method (CVM). The study also analyzes the effects of variables that are known to be important for the green bond based on previous studies. The study identifies that there is a greenium level of 0.47%. Among the seven variables tested with logit regression models, the credit and currency of the bond had a positive effect on the greenium. The study provides helpful insights for issuers’ strategic planning and could be a stepping stone to increasing issuance not only for the Chinese green bond market but also for the global green bond market.

Bond Market Development in Bangladesh: Prospects, Challenges and Required Actions

Purpose – The purpose of this study is to focus on the present scenario of the bond market in Bangladesh and to explore prospects, challenges, and required actions to expand the market to support the growing economy and make it compatible globally. Design/methodology/approach – The qualitative research method is used for collecting and analyzing secondary data from different journals, news articles, working papers, conference papers, regulatory reports, etc. to focus on the existing bond market of Bangladesh and to find out challenges and scope for further development while recommending required actions through narrative inquiry. Findings – The bond market in this country is in a very niche phase compared to the global bond market as well as the Asian bond market, though the economy is booming. The bond market of our country is dominated by government debt securities rather than corporate debt securities. As of 2021, Bangladesh's bond market size stands at $18 billion compared to the global bond market size of $124 trillion. And compared to some East Asian and South Asian countries, the bond market size of Bangladesh is very low through percentage analysis of GDP. Study limitations – Only secondary data is evaluated and scrutinized for this study. Practical implications – For Bangladesh, the creation of the debt market is essential to build an efficient and compatible capital market. Other than the equity market, various financing vehicles need to be created and different financing modes need to be opened by the government or any other public and private concern for the development of mega infrastructural projects. Nowadays, to minimize the budget shortfall to undertake such mega projects, borrowing from the banking sector becomes essential. On the other hand, this market would also create an opportunity for investors as an alternative investment vehicle. Originality/value – This study focused on the current bond market scenario in Bangladesh and showed a comparative analysis of the bond market portfolio of our country with developed countries and other developing countries. The prospects and challenges of expanding the existing bond market and required future actions to build an effective bond market in Bangladesh are also recommended in this study.

Exploring the Motivation and Impact of the Fed's Rate Hike and Tapering

After more than three years, the Federal Reserve has once again entered the interest rate hike cycle - the Fed recently announced a 25BP increase in the target range for the federal funds rate to between 0.25% and 0.5% (this is the Fed's first rate hike since December 2018) while hinting that it will soon begin to reduce its balance sheet. The Fed's rate hike and tapering based on continued high inflation will undoubtedly have a series of profound effects on the global stock market, bond market, currency market, commodity market, and other markets, as evidenced by the possible divergence in the performance of different sectors of the US stock market, with the growth sector suffering a certain impact; interest rates on US bonds will also rise sharply, etc. For China, we have to guard against the negative impact of the Fed's interest rate hike spillover effect on the economy.

Institutional structure formation of the global green finance market

The article studies the strategic directions of the Eurasian Development Bank as an important element of the institutional structure of the global green finance market.The current differentiated global structure of green finance market institutions has been shown, and the substantive focus of organisations at two levels of the institutional structure of this market has been shown. A statistical overview of green finance institutions by country, region, type and financial instruments used has been made. The role of multilateral development banks in the structure of such institutions has been shown. The need for the formation of institutions in the green financial market segment as a necessary element of green finance has been substantiated.The structure of institutions on two levels has been given: 1) subjects – participants of the green bond market; 2) a set of institutions developing and shaping the methodology for green financial instruments assessment, standards, taxonomy, ratings. Using the global green bond market as an example, up-to-date statistics and analysis of the broader composition of issuers of green financial instruments by country, world region, sovereign and corporate participants, and development institutions have been presented. Emphasis has been placed on public issuers and the participation of multilateral development institutions in financing green economy projects in various countries. The experience of Eurasian Economic Union countries in developing green finance has been summarised and the prospects for Russia and Kazakhstan in the green finance movement have been noted.The institutions of the differentiated structure of the global green finance market identified in the study have been grouped into two levels depending on the profile of their participation in the green economy; the directions and tools for the prospective development of the Eurasian Development Bank’s green finance activities have been defined; recommendations for prospective aspects of the methodological and analytical activities of the bank in the context of the Eurasian Development Bank Strategy 2022–2026 have been proposed.The study applied an analysis of scientific literature in the field of institutional theory, green economy and green finance, statistical, comparative, factual analysis, review and analysis of information from official websites of international development institutions, government and corporate entities, international rating agencies included in the architecture of the global green finance market.

Global Economic Policy Uncertainty and Government Bond Market Volatility

Global Economic Policy Uncertainty and Government Bond Market Volatility

Determinants of green bond premium in the ASEAN market amidst the COVID-19 pandemic

Green bonds as a means of financing instrument for sustainable projects have caught the eyes of investors in recent years. With the growth of the global green bond market exceeding 50% in 2019 (CBI, 2019), green bonds serve as a promising financial instrument for organizations and a promising financial asset for investors. Previous studies have conflicting results in identifying the premium investors pay for investing in green bonds where both a positive and negative premium was observed. This study aims to examine the premium of green bonds issued in Southeast Asia before and during the COVID-19 pandemic from March 2016 to April 2021 by using a two-step regression model. In the first step, by employing a fixed-effect model to 42 green bonds, the results of this study suggest a positive green bond premium before the COVID-19 pandemic and a negative green bond premium during the pandemic. Additionally, this study conducts cross-section regressions to investigate the determinants of green bond premium. The results imply that rating, currency, issue amount, and time to maturity significantly affect the green bond premium.JEL: C23, G12, G14, G20, Q56

Information Asymmetry, the Role of Intermediaries, and Underpricing in the Global Debt Market

This paper investigates underpricing in the global bond market. It associates losses in proceeds from bond issues to information asymmetry between issuers and investors. This information asymmetry is driven by firm risk and the quality of intermediaries, particularly when a transaction crosses a national border. Moreover, the influence of cross-listing on underpricing is theorized to be contingent on intermediaries and the investor protection in the capital market. Empirical predictions are tested on a unique dataset of 5,507 bonds issued by firms from 23 home countries in seven capital markets between 2007 and 2017.

Modelling Global Bond Markets under Covid-19 Shadow

The spread of the novel coronavirus has had an impact on the world economy including the stock and bond markets. This paper investigates the linkages between bond and stock markets of Asia, USA, and Europe in pre-Covid and Covid period. Daily data of Asia (Pan-Asia corporate bond), US (Treasury Bonds) and Europe (Eurozone-Investment-grade corporate bond) have been taken for two different periods. First period is from 1 November 2018 (pre-Covid) to 31 October 2019 and second period is from 1 November 2019 to 10 August 2020 (Covid period). Descriptive statistics, correlation, ARDL method, Granger-Causality analysis and VAR Model were applied to examine the long-run and short-run associations among these indices /variables. It is concluded that the correlation relationship of selected indices have changed from pre-Covid time to Covid time. One of the interesting findings is that long term association among the selected variables does not change between two periods. Few variables that were previously not influencing other variables have started affecting them during Covid period. This study aims for portfolio managers and investors who are keen on taking decisions for investment purposes in pandemic period.