Treasury Bond Research Articles

The Role of Financial Risks and Financial Sustainability in the Iraqi Stock Markets during COVID-19 Pandemic

This paper compares the company's ability to sustain a diversified resource base for long-term service to its customers without need for external funding sources through two stressful systems of financial markets, the financial crisis aftermath 2008 and the COVID-19 epidemic. Our findings indicate that financial sustainability has been affected by disasters. Banks can impose significant risks on the economy, one of the main concerns about the causes of the current financial crisis is that banks engaged in excessive risk-taking, it has faced during the 2008 crisis liquidity and credit risks, while Through the 2020 crisis which is the COVID-19 pandemic crisis, the most significant financial risks that banks experienced were credit risks due to banks ’dependence on traditional, weak, safe assets, including the dollar, the Swiss franc, and other treasury bonds during the COVID-19 pandemic. This led to a lack of cash reserves held by banks, which led to weak investor tolerance towards financial risks, especially as the nature of crises is changing, as the results have proven that departures from riskiest directorships are more beneficial during the COVID-19 crisis because managers deal with the crisis in the same way as a crisis 2008 On the other hand, departures from riskiest directorships lead to higher administrative costs due to a lack of expertise.

U.S. leveraged loan and debt markets: Implications for optimal portfolio and hedging

This paper offers fresh empirical evidence on the relationship between leverage loans and US debt markets by investigating the distributional predictability and directional predictability between leveraged loans and treasury bonds, fixed income securities and corporate bonds in the U.S economy. We use daily price data from January 2013 to April 2021. First, we analyze the causal relationship between variables by applying non-parametric causality-in-quantiles test and find that quantile causality in variance shows the stronger impact of leverage loan market returns on US debt market returns over the entire quantile range. Second, quantile dependence and directional predictability between leverage loan market and US debt markets are analyzed by applying cross-quantilogram approach and estimated results show the heterogeneous quantile relations from leverage loan market to US debt market. Moreover, the cross-quantile correlation results demonstrate the evidence of negative predictability from leverage loan market to US debt market in low, medium and high quantile range. These evidences are important for US investors and portfolio managers.

Monetary policy transmission in China: dual shocks with dual bond markets

AbstractAlthough China’s monetary and financial system differs drastically from its Western counterpart, empirical studies covering this vast economy have often been simple reestimations or recalibrations of models originally designed to describe US or European monetary policy. In this paper, we aim to assess Chinese monetary policy and, in particular, monetary policy transmission through yield curves into the real economy. Our study takes into account the peculiarities of the Chinese economy: Namely, our model includes both China’s modern attempts at a market-based monetary policy as well as the “authority-based” one that is a relic of the original banking system. Besides, it considers the special nature of the Chinese treasury bond market, which is separated into two independent ones with very limited direct arbitrage opportunities between almost identical assets. Finally, it incorporates the role of real estate, which played an essential role in China during the last decade. Our results show that different monetary policy shocks cause asymmetric effects on macroeconomic and financial variables.

Monetary Policy and Bond Prices with Drifting Equilibrium Rates

AbstractWe study the drift and cyclical components in U.S. Treasury bonds. We find that bond yields are drifting because they reflect the drift in monetary policy rates. Empirically, modeling the monetary policy drift using demographics and productivity trends, plus long-term inflation expectations, leads to cyclical deviations of bond prices from their drift that predict bond returns in- and out-of-sample. These bond cycles can be interpreted as term premia or/and temporary deviations from rational expectations in a behavioral framework. Through the lens of our model, we detect a significant role of the latter in determining the cyclical properties of yields with short maturities.

Effects of Domestic Debt Securities on Economic Growth in Nigeria

Debt is considered beneficial for economic growth due to its overriding impact on savings, investment, financial deepening, and institutions. However, despite the fact that studies that attempted to examine the effect of domestic debt securities on economic growth in Nigeria have proliferated in recent years, only a handful has been able to measure individually the impact of the various debt securities on economic growth in developing countries. It is against this backdrop that this study is undertaken to determine the effect of debt securities on economic growth in Nigeria. The study used time series data covering a period of 22 years (1999-2021) and employed the Auto regressive distributive lag (ARDL) technique to empirically study the effect of the treasury bills, treasury bonds, government bonds and promissory notes on economic growth in Nigeria. The data used for the analysis were sourced from the World Development Indicators (2021) and CBN Statistical Bulletin (2021). The findings revealed that treasury bills, treasury bonds, government bonds and promissory notes all had positive effects on economic growth in Nigeria both in the short and long run. Therefore, the study recommends for consistent implementation of wider monetary policy reforms that promises assured returns and stability of funds to investors in order to promote investment in these instruments. Institutions such as SEC, Pension funds, Insurance companies, should be encouraged to invest in the listed instruments.

DYNAMIC LINKAGES AMONG GOVERNMENT BONDS YIELD (SBN-DOMESTIC), MARKET INDEX (IHSG), US TREASURY BOND YIELD, SP500 AND EXCHANGE RATE (IDR/USD)- EFFECT OF PANDEMIC-COVID19 BY VECTOR ERROR CORRECTION MODEL (VECM) APPROACH: EVIDENCE FROM INDONESIA

This study empirically examines the dynamic linkages among yield SBN-Domestic and IDXComposite to the shocks of US Treasury bonds, SP500, and IDR/USD. Analysis applying VECM. IRF, VD, and Granger causality. testing proved that in the long run, during the pandemic-covid19 period, the SBN-Domestic experienced a significant change to all shocks, but the biggest changes were on SBN3Y and SBN5Y. This was due to the fact that during the Covid-19 pandemic, SBN3Y and SBN5Y were considered high risk. IDX-Composite was significantly changed for SP500 during the pandemic-covid19 period. The variance decomposition test proved that in the long run, SP500 has the highest variance contribution.

An Assessment of Liquidity and Shareholders’ Earnings of Listed Firms at The Nairobi Securities Exchange, Kenya

The global changes in the business environment and the increased demand for improved shareholder’s earnings have prompted big firms to re-examine their liquidity levels. During the 2008 global economic crisis, many big institutions experienced liquidity challenges which led to the decline in the earnings of shareholders. The current study was therefore necessary to analyse the effect of liquidity on shareholders earnings of listed firms at the Nairobi Securities Exchange. The liquidity theories, were used to guide the research. A descriptive research design was used in this study. The study’s target population was all listed companies on the Nairobi Securities Exchange over the period 2015 to 2021. The 64 companies were analyzed using the census study. Data had been collected using a secondary data collection sheet. The study employed secondary data obtained from the published financial statements of the respective firms, from the Nairobi Securities Exchange and the Capital Markets Data. A panel regression model was employed in the analysis of data with the aid of the stata version 14. The study found out that Liquidity had a positive significant effect on the shareholders earnings. The study recommends that listed firms should enhance its liquidity by investing more on liquid assets. This should entail more investments in treasury bills, treasury bonds and other liquid stocks. They should also diversify their investments by investing in money markets. Additionally it should enhance its liquidity by controlling its overheads through getting rid of unnecessary expenses. Secondly, the listed firms need to expand its asset base.

Back to the 1980s or Not? The Drivers of Inflation and Real Risks in Treasury Bonds

Back to the 1980s or Not? The Drivers of Inflation and Real Risks in Treasury Bonds

РИНОК ДЕРЖАВНИХ БОРГОВИХ ЦІННИХ ПАПЕРІВ ЯК МЕХАНІЗМ ФІНАНСУВАННЯ БЮДЖЕТНОГО ДЕФІЦИТУ

The military invasion of Russia on the territory of Ukraine caused a number of negative con-sequences for the economy. The state of Ukraine's economy has a direct impact on the balance of the state budget. Today, this is reflected in the growing budget deficit. The shortage of financial resources of the state became the reason for the search for potential on the domestic and foreign markets. The securities market is a platform for the formation and distribution of loan capital in any country. At the same time, a separate segment is formed that serves the state and attracts financial resources. This segment is called the market of government debt securities. The article describes the functions performed by this market, in particular: mobilizing, investment, transformational. Among the instruments circulating in this market are government bonds and treasury bonds. Do-mestic state loan obligations are one of the outcomes of the financial instruments market. The trade in such securities was analyzed in terms of investment subjects. Also, indeed, an assess-ment of the circulation of military obligations. The market of government debt securities actually covers the entire securities market in Ukraine. In general, this allows financing the needs of the state and is positive. However, without other segments, it is not sufficiently developed. The evalu-ation of the key indicators of the state securities market made it possible to single out key problems, including: mistrust of foreign investors; narrow selection of financial instruments; speculative ac-tions of unscrupulous investors; decrease in the level of income of the population, etc. We consider the following to be the main ways of activating the market: carrying out new ones related to the revision of the regulatory framework and, accordingly, bringing it into line with the norms of international standards reforms; strengthening control and review of the market, including the avoidance of speculative transactions; maturity dates for bonds and others.

Do bonds indexed to inflation protect against its negative effects? Analysis of rates of return in real terms for treasury bonds issued by Poland

Do bonds indexed to inflation protect against its negative effects? Analysis of rates of return in real terms for treasury bonds issued by Poland

A novel decomposition integration model for power coal price forecasting

Accurate prediction of steam coal prices is important for stabilizing the coal trading market and formulating coal use strategies scientifically. In this paper, a new decomposition integration model (VADM) is proposed to predict coal prices by combining the variational modal decomposition (VMD), arithmetic optimization algorithm (AOA), deep temporal convolutional network (DeepTCN), and mean impact value algorithm (MIV). Firstly, the AOA optimization algorithm is used to improve the VMD, AOA-VMD was obtained. It is used to decompose the steam coal price series. Then, the decomposed subsequences are predicted for the prediction of steam coal prices by using DeepTCN. Finally, the MIV algorithm is applied to analyze the impact of different factors on the price of steam coal. It is found that: the steam coal price sub-series decomposed by AOA-VMD are smoother and more linear compared with the original series; the errors in forecasting steam coal prices are significantly reduced after considering newly proposed factors, interest rates, such as the overnight Shanghai interbank offered rate and the six-month treasury bond yield; the MAPE, MASE and SMAPE of the VADM model all show different degrees of decline compared with benchmark models. The forecasting effect of VADM model is better than the benchmark model in terms of stability and accuracy, and can be used for short-term forecasting of coal prices.

The Influence of the Ukraine Conflict on American Capital Market and Asset Price

The escalation of the Russian-Ukrainian war not only strengthened the geopolitical turmoil, but also affected the global capital market. This paper collects information about the S&P 500 and other indexes; Comparison of yields on 2-year, 5-year and 10-year U.S. treasury bonds and VIX index; CPI, gold price, gold inventory and gold futures price, etc.; Crude oil production, crude oil prices and inventories, crude oil futures prices and other data before and after the war (February 23, 2021 to February 23 and 2022, February 24, 2022 to now). It aims to study the objective impact of the Russian-Ukrainian war on the US capital market and asset price trend. It is found that the volatility of the stock index of U.S. stocks increased at the beginning of the war, and the overall U-shaped; The VIX index also increased, meaning investors wanted to increase purchases of assets with safe-haven properties such as U.S. Treasuries and gold; The short-term increase in demand for gold futures and crude oil futures will increase the price of gold and crude oil, but will gradually return to the normal level as the war progresses.

주택도시기금 신규재원 확충을 위한 프랑스 주택행동기금의 적용가능성 고찰

There has been a thin literature concerning NHUF (National Housing and Urban Fund), specifically how to extend its cash-inflow sources circulatable on a long-term basis. Two main funding sources of NHUF, Korea Treasury Bond and Housing Subscriptive Savings Account, are so vulnerable to the changes of economic cycles and have a fine limit to upgrade the amount. The purpose of this study is to review the French case of ALS (Action Logement Services) using the employers’ compulsory donation, named as PEEC (Participation des employeurs a l'effort de construction: Participation of Employers in the Construction Effort), and then examine its applicability to NHUF in Korea. In the PEEC, all the business entities which hire more than 50 employees must donate 0.45% of payrolls in the previous year to ALC. Applying the system only to 500 big firms in Korea can increase around 450 billion KRW each year thereby being very beneficial to securing a long-run funding source. Firms may raise complaints against the introduction of a new quasi-tax, thus the government must consider mitigation measures to blunt the firms’ burden, e.g. firms’ lending to NHUF and the immediate securitization of those loan assets in the capital market. An alternative collection idea is to add some more percentage to the registration fees for new buildings, e.g. 0.5% of building value. It is expected to generate more than half a trillion KRW each year.

What to Expect For the Retail CBDC: Evidence from E-payment and Financial Stability in China and Korea

This study explores what can be expected for launching a Central Bank Digital Currency (CBDC) by investigating relationship between e-payments and financial stability. Most studies analyzed the impact of CBDC on financial stability focusing on a single nation’s economy. Few studies prospected the impacts of CBDC on the financial stability by comparing two nations with varying payment infrastructures. This study uses e-payment as a proxy for CBDC to derive implications on retail CBDC and financial stability.
 This study is significant in that it seeks to prospect the effect of CBDC on financial stability by employing a real data analysis. This paper first identifies the causal correlation between e-payment and financial stability in China and Korea using a VAR model. Then, it employs a LSDV model to measure the effect of latent variables on financial stability in China and Korea when the coefficient between e-payment and financial stability is fixed equal. I use the quarterly panel data of capital adequacy ratios (CAR), e-payments, stock prices, and treasury bond yields spanning from 2014:Q1-2022:Q2. The results of the Granger test suggest that there is no Granger cause relationship between e-payments and BIS capital ratios. Meanwhile, the results of LSDV suggest that e-payments and financial stability are positively correlated and it is statistically significant. The positive correlation are larger when the variables affecting the financial stability are controlled. The results also suggest that the Korea-specific component is larger than the China-specific component implying that financial stability in Korean economy is more likely to be affected by the latent factors other than e-payment compared to the Chinese economy. Yet, owing to the negative impact of COVID-19 on the banking sector, the coefficient of e-payment and the financial stability is negative in the COVID sample. The risk premium is found to have a negative correlation with financial stability, and it was more evident in the Korea-specific component than in the China-specific component. It is inferred from these findings that China would have a greater incentive to launch a retail CBDC than Korea considering its prospected positive effect on financial stability.

Implication of Domestic Debt on Economic Growth in Nigeria

The study assessed the implication of domestic debt on the growth of the Nigerian economy using treasury bills, treasury bond and other domestic debt instruments on economic growth. The ex-post facto research design was used. Secondary data were gotten from the CBN statistical bulletin for the period 1990 to 2019. The data were analyzed using the Autoregressive Distributive Lag (ARDL) technique. Findings from the analyses showed that there was an insignificant effect of treasury bill on the growth of the Nigerian economy both in the short run and long run. The study showed that there is a significant short run effect of treasury bond but an insignificant long run effect on the growth of the Nigerian economy and lastly, it was discovered that domestic debt instruments other than treasury bond in Nigeria had no significant effect on economic growth. Based on the findings, the study recommended that government should reduce short term domestic borrowing and use more of long-term debt instrument in mobilizing funds for its activities to enhance economic growth. Also, in using long term borrowing instrument the focus should be on treasury bond as it promises high economic returns and prospects in the short run which could add up to long term economic progress and lastly borrowed funds should be monitored closely to avoid embezzlement and to ensure that it is used for infrastructural building and for the attainment of peace and security of lives and properties as this would trigger economic growth both in the long run and short run.

COMPARISON OF THE FINANCIAL CONDITION OF MILK PROCESSING ENTERPRISES IN POLAND AND UKRAINE

The study aimed to compare and evaluate the effectiveness of enterprises processing and trading dairy products in Poland and Ukraine. Milk processing is an important sector of food production. Milk and milk products account for about 14% of world trade in agricultural products. The five largest companies from Poland and Ukraine were selected for the study. Evaluation of the effectiveness of dairy enterprises required the adoption of appropriate indices. Therefore, the research considered, above all, the indices characterizing the profitability of the surveyed companies as the basic ones in the evaluation of the financial condition of enterprises. In addition, the evaluation included the surveyed enterprises’ return on sales, assets, and equity. The analyses were performed based on data available in the EMIS database for 2016-2020. In Poland, the milk processing sector was in a relatively good financial condition, although the profitability ratios were not too high. Profitability ratios have long been lower than the food industry average and have fallen even further in recent years. The data show that the return on equity slightly exceeded the interest rate on bank deposits and treasury bonds. In Ukrainian enterprises, the return on equity, assets, and sales was much higher, but it was also characterized by high volatility.

Ultra Treasury Bond Futures

In this article, we determine the quality option value of Ultra Treasury bond futures contracts, which allow deliverable bonds between 25 and 30 years to maturity, and compare them with the new regular Treasury bond futures, which allow deliverable bonds between 15 and 25 years to maturity. We use the arbitrage-free Ho-Lee model for the valuation. Using weekly data from March 25, 2011, until April 16, 2021, after the Ultra futures contract was introduced, we discover that (1) that quality option value is higher for the Ultra futures than the new regular futures, (2) the Ho-Lee model consistently underprices the market, and (3) the “dry spell” period predicted by <xref>Ben-Abdallah and Breton in 2017</xref> is only partially supported.

Application of the Yield Curve Inversion Indicator to Determine the Current Phase of the Stock Market

Purpose: To establish the possibility of using the indicator of the inversion of the difference in the yield curve of 10-year and 2-year US Treasury bonds to determine the current phase of the stock market, predict the future direction of market movement and improve the efficiency of managerial investment decisions.&#x0D; Design/Method/Approach: The following methods were used when writing the paper: empirical – to carry out experimental checks of the revealed regularities; graphic - for a visual presentation of research results; systematization and generalization - for generalization of scientific concepts, developments, and proposals; statistical - to implement a quantitative approach to studying data. The US stock market was chosen as the base for research. The research was carried out by statistical processing of data on the value of the indicator of the inversion of the yield curve difference of 10-year and 2-year US Treasury bonds and the Standard &amp; Poor's stock market index - 500 for the period from 1989 to 2022.&#x0D; Findings: It has been established that the indicator of the difference of the yield curve of 2-year and 10-year US Treasury bonds is a fairly reliable tool for determining the approaching recession in the economy, but at the same time it is not possible to determine the exact time of the recession. It is shown that this indicator is expedient to use for early warning about a possible fall in international stock markets. At the same time, it was found that not every inversion of the yield curve is followed by a fall in the stock market, but every fall is preceded by an inversion. It was noted that the current dynamics of the yield curve are signaling a possible significant drop in the US stock market in the near future.&#x0D; Theoretical Implications: Establishing the peculiarities of the indicator of the inversion of the yield curve difference of 10-year and 2-year US Treasury bonds in the conditions of the modern economy.&#x0D; Practical Implications: The practical application of the research results will allow us to more accurately determine the current phase of the international stock markets and receive early signals about the future decline of the markets, which will contribute to increasing investment efficiency.&#x0D; Originality/Value: This study expands knowledge about the peculiarities of the use of the indicator of the yield curve difference of 2-year and 10-year US Treasury bonds when determining the likely onset of a recession in the economy and the possibility of a fall in international stock markets, offers an updated model of the use of this indicator when forecasting the direction of movement of international stock markets. The results of the research may be of interest to specialists who work in the field of investing in international financial markets.&#x0D; Research Limitations/Future Research: The results of the work presented in this article create a basis for conducting similar research on the possibility of using other indicators in order to increase the accuracy of establishing the moment of recession in the economy or the beginning of a fall in international financial markets. From the author's point of view, first of all, such indicators as the movement of gold prices, the dynamics of changes in the Fed's discount rate, and Buffett’s indicator should be studied. This will make it possible to develop an effective application mechanism for making investment decisions and will contribute to increasing investment efficiency.&#x0D; Paper Type: Empirical&#x0D; JEL Classification: E44, F21, G15

The connectedness between meme tokens, meme stocks, and other asset classes: Evidence from a quantile connectedness approach

The recent influence of the meme stock and meme token phenomena have raised new challenges for investors and policymakers. We examine the quantile connectedness between meme stocks, meme tokens, and traditional financial assets such as stock, gold, oil, U.S. dollars, and U.S. Treasuries. We find that meme stocks and meme tokens exhibit a time-varying connectedness with traditional financial assets that varies across quantiles. We observe the highest connectedness between meme stocks, meme tokens, and traditional financial assets at the extreme upper and lower quantiles. This highlights the importance of tail connectedness analysis. At the upper extreme quantiles, meme stocks and meme tokens are the drivers of shock transmissions, suggesting that price bubbles or market short squeezes in these meme assets can be contagious to other markets. At lower extreme quantiles, meme stocks and meme tokens are the shock receivers, while gold and Treasury bonds are shock transmitters. This is consistent with investors fleeing to quality under extreme negative market conditions. Our findings provide useful information to regulators, retail investors, and institutional investors regarding portfolio risk management and financial market stability in the extreme and normal market conditions.

Hedge and safe-haven properties of FAANA against gold, US Treasury, bitcoin, and US Dollar/CHF during the pandemic period

The sudden market crash around 20 February 2020 on the dawn of the COVID-19 pandemic has accelerated the digitalization of all human communication and revived the interest for risk mitigation during stress periods. Interestingly, FAANA (Facebook, Apple, Amazon, Netflix, and Alphabet) stocks exhibited positive returns with remarkable resilience throughout the pandemic period, suggesting a change in their investing risk. In this paper, we take a different step from the existing literature and examine the hedging, diversifying, and safe haven properties of FAANA stocks against four alternative assets, namely gold, U.S. Treasury bonds, Bitcoin, and U.S. Dollar/CHF. Our analysis covers an extended sample period comprising the heightened uncertainty during the recent pandemic period. It involves conditional correlations, optimal weights, hedge ratios, and hedging effectiveness for the pairs of FAANA stock and alternative asset during the full sample period and the COVID-19 pandemic period. The results show that the majority of FAANA stocks serve as weak/strong safe havens against gold, Treasury bonds, Bitcoin, and Dollar/CHF in the full sample period. Further, few FAANA stocks serve as strong safe havens against the U.S. Treasury and Dollar/CHF during the pandemic. Our findings suggest that FAANA, once thought as risky high growth tech stocks, have gained maturity and became a safe blanket during the latest turbulent period.