Bond Yields Research Articles

Heterogeneous macro and financial effects of ECB asset purchase programs

Like other central banks, the ECB resorted to asset purchase programs (APPs) to replace conventional policy measures. We examine their impact on the Euro area with a focus on the heterogeneity among its constituents and across financial markets. Our analysis combines a Bayesian structural VAR with an identification scheme based on market surprises at the announcement time, effectively capturing structural dynamics. At the Euro area level, APPs stimulate the economy, lower government bond yields, elevate stock prices, and reduce corporate and sovereign stress. The impact shows heterogeneity in the stock market with a widened value-growth spread in stocks and varying sector impacts, particularly favoring financial stocks, and across countries with stronger effects on southern Euro area countries. Our results show strong spillover effects between countries, indicating challenges in the precise targeting of APPs.

Consumption Growth Persistence and the Stock–Bond Correlation

Abstract We consider a model in which the correlation between shocks to consumption and to expected future consumption growth is nonzero and varies over time. We validate this assumption empirically using the model’s implication that time variation in consumption growth persistence (CGP) drives the correlation between stock and bond returns. Our model implies that the stock–bond correlation is also related to the predictive relation between bond yields and future stock returns. Finally, we provide suggestive evidence that asset price fluctuations are the primary driver of changes in CGP.

Impact of the Petroleum Tax System in Norway on the evolution of money market and bond yields. Considerations from the “atypical” year 2022

We call the year 2022 as “atypical” for the Norwegian budget, given the record revenue that was achieved due to increases in oil and gas prices. After the Russian invasion in Ukraine in 2022, and the subsequent oil cut deliveries from Russia, Norway became Europe's largest supplier of natural gas. The event lead to Norway generating the highest oil and gas tax revenue ever recorded by the Scandinavian government, with spill-over effects on the economy as a whole and on the money market liquidity and hence interest rates in particular.Given the benefit that the Scandinavian state ended up with, as a result of the war in Ukraine, some researchers even argue about its so-called status of “war profiteer”.Also, the Norwegian Krone (NOK) significantly benefited from the demand of local currency from the oil and gas companies, especially in October 2022, when the second yearly tax installment was due. Money market rates skyrocketed in that particular period, as the structural liquidity decreased, signaling the level of oil and gas taxes (and hence the market demand for NOK to pay them) was markedly beyond Norges Bank estimations.

Indirect effects of trading restrictions

Stock market trading restrictions affect prices and liquidity directly through constraints on investors' transactions and indirectly by altering the information environment. We isolate this indirect effect by analyzing how stock market restrictions affect corporate bond yields. Exploiting the staggered reductions of trading restrictions in the Chinese stock market as a quasi-natural experiment, we document that the easing of trading restrictions on a firm's stock decreases its corporate bond spreads. This effect is stronger for firms with less transparency or lower credit ratings. Our evidence suggests that the effect is likely due to improved stock price informativeness.

Social Return on Investment (SROI) from the Community Waste Bank Implementation under the Learning Center of Systematic Waste Management Innovation According to the Circular Economy Concept

This article presents the results of social return on investment (SROI) evaluation in the community’s waste bank program implemented in the Moo 7 and Moo 8 Villages of Tan Diao Subdistrict, Kaeng Khoi District, Saraburi Province during 2020–2022, which is a part of the Learning Centre of Systematic Waste Management Innovation According to the Concept of Circular Economy project. This research employed participatory action research to collect data on total cost for investment and income from selling recyclable waste through in-depth interviews and focus groups with a total of 40 stakeholders including: 25 community members, 5 community leaders, 3 representatives from Tan Diao Subdistrict Administrative Organization, 5 village health volunteers, and 2 private waste buyers. The SROI analysis of the Moo 7 and Moo 8 waste banks (2020–2022) by using the discount rate based on the government bond yield at 3% shows the total net present value at 106,166.60 Thai Baht (2,941.76 USD), a ratio of cost-benefit analysis at 12.74 times, the payback period at 4.7 months, and the SROI result is 2.65 Thai Baht (0.073 USD). In other words, for every 1 Thai Baht invested in the community waste banks during this period, the benefits generated were equivalent to 2.65 Thai Baht (0.073 USD). This translates to a positive return on investment. The contribution of community waste bank under the project, can significantly change in 1) community relations with an intensive engagement in community waste management, 2) economic perspective as it generates employment and income, and reduces transportation costs for landfilling, and 3) environment term, as it reduces household waste and waste disposal. The suggestions have been developed in terms of policies and action plans for community waste management together with local administrative organizations to develop Tan Diao Subdistrict as a model of waste management.

Quantifying the impact of interest rate volatility on Asian energy companies: A comparative study of fossil and renewable sectors

This study examines the impact of government bond yield volatility on companies in the fossil and renewable energy sectors in five Asian countries from 2015 to 2023. The analysis uses quantile-based methods to explore the spillover effects of yield volatility on companies with high and low debt levels in these sectors. The findings show that yield volatility tends to transmit shocks at lower quantiles and over shorter periods. The network connectedness is more critical at extreme upper and lower quantiles in the short term. The results also reveal significant differences in how yield volatility affects companies with high and low leverage levels, and these effects vary across the sample countries. Overall, this research provides valuable insights into the influence of yield volatility on financial decision-making in different contexts and industries. The study's results underscore the imperative for policymakers and stakeholders in the energy industry to give precedence to improving risk management methods.

Examining the dynamics of risk, performance, and volatility during COVID-19: Evidence from Moroccan stock market

This study delves into the repercussions of the COVID-19 pandemic on the Moroccan stock market, with a specific focus on the MASI index and sectoral indices. The examination en-compasses distinct pre-COVID and during-COVID periods, shedding light on the market’s evolution, marked by unique phases and fluctuations. Notably, the MASI index experienced a significant downturn in March 2020, indicative of the pandemic’s disruptive impact on investor behavior. Despite this setback, the market showcased remarkable resilience, staging a swift recovery and surpassing pre-crisis levels by the close of 2020. This rebound can be attributed to various factors, including historically low bond yields, the initiation of vaccination campaigns, and the resumption of dividend payouts by the banking sector. Our findings bring forth a nuanced understanding of performance and risk dynamics across individual sectors. Moreover, there is a noteworthy surge in correlations between sectoral returns during the COVID-19 period, limiting diversification options for investors and exposing them to heightened risks. The volatility patterns, analyzed using GARCH models, underscore the dynamic nature of the MASI index, exhibiting stability in the pre-pandemic phase and a transient disturbance during the initial pandemic shock. This study contributes to the existing body of literature on the global financial impact of COVID-19, providing valuable insights into the Moroccan context. The results emphasize the significance of comprehending sector-specific vulnerabilities and market dynamics for both investors and policymakers. In navigating the uncertainties of the post-pandemic era, these insights offer crucial perspectives for market participants to make informed decisions and adapt optimal strategies.

A fundamental approach to corporate bond options

It is well known that interest rates and credit spreads are negatively correlated. Any successful model for pricing callable corporate bonds has to take this correlation into account. A new approach for the analysis of corporate bond options is developed by using two correlated geometric Brownian motion (GBM) processes for the spread and interest rate components of corporate bond yields. Analysis of the results and comparison with market prices suggest that the traditional methods of calculating the option premium overestimate the value of the call option. Our analysis can also explain why risk neutral credit spreads are significantly wider than implied by default probability and in fact justify higher spreads.

A Microstructure Study of Indian Corporate Bond Market: A Review

This Review study explores various dimensions of the Indian capital market, encompassing both equity and bond markets. It delves into the influence of equity market factors, macroeconomic variables, and corporate bond market growth on the overall financial landscape. The relationship between equity market returns, equity market volatility (VIX), and the rupee-dollar exchange rate on bond yields. They highlight that increasing volatility in the equity market leads to a higher demand for fixed income securities, subsequently reducing bond returns. The underscores the significance of a robust corporate bond market for financial system stability, credit availability, and mitigating corporate sector crises. It reviews the growth of the Indian corporate bond market and its implications for monetary, fiscal, and economic variables. The results indicate that a comprehensive corporate bond market does not exhibit a significant positive or negative association with these variables. However, GDP emerges as a crucial factor for India's bond market development, particularly in terms of foreign participants. Lastly, the influence of macroeconomic variables on the Indian corporate bond market over a 23-year period. They reveal a significant correlation between corporate bond market issuance and foreign exchange reserves. Through multiple regression analysis, they found that all selected variables, except GDP and trade openness, significantly explain the volumes of corporate bonds. Collectively, their findings contribute to a comprehensive understanding of the interplay between equity market dynamics, corporate bond market growth, and macroeconomic factors in the Indian capital market. The study provides valuable insights for policymakers and investors, aiding in informed decision-making regarding investment strategies, market stability, and economic growth.

Whatever-it-takes policymaking during the pandemic

Central banks across the globe introduced large-scale asset purchase programs to address the unprecedented circumstances experienced during the pandemic. Many of these programs were announced as open-ended to shock-and-awe market participants and restore confidence in financial markets. This paper examines whether these whatever-it-takes announcements had larger effects than announcements with explicit limits on scale. We use a narrative approach to categorize announcements made by twenty-two central banks, and event study, propensity-score-matching, and local projection methods to measure the short-term effects of policy announcements on exchange rates and sovereign bond yields. We find that on average a central bank’s first whatever-it-takes announcement lowers 10-year bond yields by an additional 47 basis points relative to size-limited announcements, suggesting that communication of potential policy scale matters. Our results for yields hold for both advanced and emerging economies, while exchange rates go in opposing directions, muting their response when we group all countries together.

Readability of Pension Narrative Disclosures, Pension Regulatory Changes, and Corporate Credit Risk

We examine, using corporate bond yield spreads, whether and how the readability of pension narrative disclosures is associated with corporate credit risk. The empirical results show that lower readability of pension narrative disclosures is associated with higher bond yield spreads. This association is driven by theoretical mechanisms, including incomplete information, asset value volatility, and financial leverage. The implementation of SFAS No. 132R-1 and the Pension Protection Act (regulatory mechanisms) has strengthened this association. We also consider two potential mechanisms that weaken the association between the readability of pension narrative disclosures and bond yield spreads: bond seniority and collateralization and shorter duration of debt to pension liability. Furthermore, our results show that pension plan size strengthens this association, whereas the funded status, actual return on pension assets, and equity allocation of pension assets weaken this association. Lastly, the results still hold when considering endogeneity issues, controlling for the tones and the length of pension narrative disclosure, employing difference-in-differences analysis, and examining firms with defined-benefit pension plans only or those with newly issued bond observations.

Unraveling the impact of female CEOs on corporate bond markets

AbstractLittle is known about how executive gender shapes the inherent conflict of interest between shareholders and bondholders. Using a sample of almost 100,000 unique bond‐year observations, this study investigates how the appointment of female chief executive officers (CEOs) lowers the default outlook. Our evidence indicates that bond yield and bond volatility are significantly lower after a female takes the helm at a firm. This executive gender effect remains highly statistically and economically significant across various robustness checks and after addressing endogeneity concerns. Female CEOs lower the default risk component of the bond yield but have no material impact on the liquidity component. Subsample analysis substantiates the conditional effect of female CEOs on bond yield and bond volatility. Our evidence indicates that female CEOs’ risk‐averse attributes pass through the credit risk and information asymmetry channels.

Deposition of Fine-Pitch Indium Bumps on Single Die

Photolithographic lift-off at wafer level is a wellestablished method for depositing indium bumps onto pixels of electronic components such as sensors and application-specific integrated circuits (ASIC). These indium bumps form interconnects between pixels of the components during flip-chip bonding to make devices such as radiation detectors. Such components are not always available on wafer-scale, and single dies need to be processed in small-scale production, R&D, or for Cd(Zn)Te detector material. Photolithography on single dies is ineffective due to the edge-bead of photoresist that compromises perfect indium deposition onto pixels near the periphery of the die. To utilize the maximum surface area of a die, a rigid mask with apertures (shadow mask) is an adequate substitute for the photoresist. Different mask designs and production techniques for fine-pitch indium bump arrays are investigated by testing electroformed stencils or micromachined silicon (Si) membranes as shadow masks. For the indium deposition, the sensor and ASIC dies are clamped into custom-made jigs that include shadow masks. Alternatively, dies can be adhered to shadow masks with soluble adhesive. The apertures of a mask are aligned to the pixel array of the detector component. Bump arrays with 250μm- and 100μm-pitch were demonstrated with electroformed stencils. For smaller pitch (55μm) and bump diameter of ~20μm, specialized masks from Si membranes are tested. Components with successfully deposited indium bump arrays were subsequently flip-chip bonded at room temperature without reflowing the indium. A bond yield of at least 99.9% pixels for such flip-chip bonded radiation detector was shown using the read-out signal from exposure with a flat field X-ray radiation of an Am-241 sealed source.

Neural network and machine learning use cases: Indian bond market predictions

This study examines machine learning techniques to investigate how artificial intelligence (AI) affects predicting future trends in the bond market. The bond market offers a global perspective on capital costs for a business by establishing the fair value of the bond issue, which is based on multiple factors. The asset price market, which has employed machine learning (ML) and deep learning (DL) techniques to address the primary forecasting difficulty, surprisingly plays a significant role in predicting future bond market returns. As an outcome, if this gap can be forecast, it can act as the bond market's data-driven long-term direction and yield additional profits. Daily security-specific data for the 10-to-3-year Indian Treasury Bond (ITB) was gathered from 2013 to 2022 and is available in the global government bonds database. The researchers looked at how well the auto-regressive integrated moving average (ARIMA), linear regression, and deep recurrent neural network-long short-term memory (DLSTM) models could predict bond yields and returns in future bond markets. The empirical results demonstrate that the DLSTM models most fairly predict the price of government bonds over both the short and longer horizons when compared to ARIMA and linear regression.

“Whatever It Takes!” How tonality of TV-news affected government bond yield spreads during the European debt crisis

Were government bond risk premia affected by the media in addition to the effects of major events? Revisiting the European debt crisis, we analyze the role of television news in the rise and re-convergence of GIIPS bond spreads vis-à-vis Germany from 2007 to 2016. We use a dataset of more than one million human-coded news items from leading newscasts worldwide to identify over 25,000 news on the Eurozone and country-specific economic topics. Our findings emphasize the relevance of the tonality of news, such that an increasing share of positive (negative) news correlates with a decrease (increase) in spreads. Content-based endogenous clustering of news highlights the importance of news about institutions providing stability and “international financial support” to distressed countries in reducing bond spreads. Moreover, weekend news enables us to establish a causal link between country-specific news coverage and changes in spreads on the subsequent trading day.

What explains foreign portfolio investment inflows to BRICS countries?

Large and volatile foreign portfolio investment (FPI) inflows raise financial instability concerns and create several macroeconomic challenges for developing countries. Identifying the factors driving FPI inflows is therefore essential for formulating appropriate policies to manage these inflows efficiently. This study uses a GM-FMOLS panel cointegration approach to examine and identify such factors for BRICS countries, the leading recipients of FPI inflows among all developing countries. The study finds that the 10-year US Treasury bond yield exerts a significant negative influence on FPI inflows. These bonds provide risk-free long-term returns to portfolio investors; hence, a rise in the yield on such bonds prompts them to readjust their portfolios away from assets in developing countries to US Treasuries, leading to a decline in FPI inflows. The study further finds that a thriving domestic stock market, a higher interest rate differential, an appreciating domestic currency, an improvement in the recipient country’s creditworthiness, and a greater degree of trade openness are conducive to FPI inflows. However, a rising consumer price index, higher foreign output growth, and greater global financial volatility discourage these inflows.

Effects of Inflation, Ten-Year Bond Yield Rate, and VIX Index on the Stock Prices of Banks Across All Three Market Capitalizations in India

This study investigates the impact of critical economic factors—namely, inflation, the 10-year bond yield rate, and the VIX index—on the stock prices of banks operating across different market capitalization segments in India. Through a comprehensive regression analysis framework, this research quantifies the relationships between these economic factors and bank stock prices while accounting for potential variances across large-cap, mid-cap, and small-cap banks. Utilizing data from the past five years, this analysis not only provides a nuanced understanding of how these macroeconomic indicators influence bank stock prices but also explores the specific effects on banks of varying market capitalizations. The findings reveal that small-cap companies are predominantly influenced by internal management decisions and capital allocation, whereas the consumer price index significantly predicts and reflects stock price behavior. Conversely, the bond yield rate and VIX index show minimal impact on stock prices. This study offers valuable insights for investors, policymakers, and financial institutions, aiding in the development of informed investment strategies and risk management practices.

딥러닝을 활용한 서울시 주택 유형별 전세가격에 영향을 미치는 요인분석

1. CONTENTS
 (1) RESEARCH OBJECTIVES This study used deep learning DNN model to empirically analyze the factors affecting Chonsei prices of each housing type in Seoul.
 (2) RESEARCH METHOD The output variables are set as the apartment Chonsei price index, the single-family home Chonsei price index, and the townhouse Chonsei price index, and the input variables are the apartment sales price index, single-family home sales price index, townhouse sales price index, number of employed people, and corporate bond yield. housing construction permit records. The spatial scope was set to Seoul, and the temporal scope was set from January 2007 to October 2023.
 (3) RESEARCH FINDINGS Looking at the LIME(Local Interpretable Model-agnostic Explanations) of each Chonsei prices input variable by housing type, when the apartment sale price index is -0.66 or less, the single-family house sale price index is in the range of -0.66 to -0.38, and the townhouse sale price index is -0.59 or less. it was found to have a negative impact on the Chonsei price index for each housing type. When the corporate bond yield was in the range of -0.89 to -0.23 for apartments, -0.89 to -0.23 for single-family homes, and -0.89 to -0.23 for townhouses, it was found to have a positive (+) impact on the Chonsei prices index for each housing type.
 2. RESULTS
 The implications are that although there are differences by housing type, the Chonsei price appears to be greatly influenced by the sale price and interest rates. Therefore, the government must continuously monitor the Chonsei price and sale price by housing type to ensure housing stability for the working class and middle class and appropriate liquidity management.

Monetary policy and currency variance risk premia

I analyze how the stance of monetary policy predicts variance risk premia in the currency market. The stance of monetary policy is measured using the shadow short rate, and two year and ten year bond yields. The stance of U.S. monetary policy predicts currency variance risk premia, after controlling for the stance of the foreign currency’s monetary policy. Contractionary U.S. monetary policy predicts lower currency variance risk premia, consistent with an increase in investor risk aversion. In contrast, the stance of the foreign currency’s monetary policy does not predict currency variance risk premia, after controlling for the stance of U.S. monetary policy.

Macroeconomic Uncertainty Indices for European Countries

The present article seeks to develop a macroeconomic uncertainty index for the EU Member States based on Google Trends for a period of fifteen years (from January 2008 to December 2022). Monthly data were collected for the 12 countries for four different word-terms, as well as for unemployment rate, inflation and the 10-year Government Bond yield. For simplifying the research the keywords searched were in English and were not translated into the countries’ own languages. Our findings were then compared to existing uncertainty indices. Lastly, we employed Impulse Response Functions (IRFs) with the existing economic indicators to highlight the effect that one standard deviation shock on the uncertainty index has on all three indicators and its ability to accurately depict the future precariousness of the country.