Abstract:
Purpose: This research evaluates sovereign bond yield connectedness dynamics
among G7 nations and major economies such as China, Russia, and India,
encompassing the COVID-19 pandemic and the Russia-Ukraine war periods.
Design/methodology/approach: The study analyzed daily sovereign bond yield data
from January 2011 to November 2023, divided into three subsamples: pre-COVID,
COVID-19, and Russia-Ukraine war periods. The Diebold and Yilmaz connectedness
approach with a Time-Varying Parameter Vector Autoregression (TVP-VAR) model
was applied to investigate yield interconnectedness.
Findings: Germany, the US, Canada, and the UK emerged as significant yield
transmitters spillovers, with Germany and the US as prime net transmitters. Japan,
India, and Italy were net receivers. Japan consistently received spillovers from
Canada, Germany, and the USA while transmitting to the UK. Italy mainly received
from Germany and France, while China transmitted to the UK, France, Germany, and
the USA. The UK shifted from a net transmitter to a receiver during crisis periods.
Practical implications: The study highlights the need for coordinated policy
responses and robust risk management strategies in light of the dynamic nature of
sovereign bond market linkages during turbulent periods. It emphasizes the
importance of monitoring major economies' roles in global financial
interconnectedness.
Originality value: This research comprehensively analyses sovereign bond yield
connectedness during recent global crises, offering insights into the changing
dynamics of financial market interdependencies. It proposes a regulatory framework
to manage interconnectedness and enhance financial stability in the face of evolving
yield relationships.
