Term Spreads and the COVID-19 Pandemic:: Evidence from International sovereign bond markets

Zaremba, Adam, Kizys, Renatas, Aharon, David Y. and Umar, Zaghum (2022) Term Spreads and the COVID-19 Pandemic:: Evidence from International sovereign bond markets. Finance Research Letters, 44, [102042]. (doi:10.1016/j.frl.2021.102042).

Record type: Article

Abstract

We explore the impact of the COVID-19 pandemic on the term structure of interest rates. Using data from developed and emerging countries, we demonstrate that the expansion of the disease significantly affects sovereign bond markets. The growth of confirmed cases significantly widens the term spreads of government bonds. The effect is independent of government policy and monetary responses to COVID-19 and robust to many considerations.

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Accepted/In Press date: 31 March 2021

e-pub ahead of print date: 5 April 2021

Published date: January 2022

Additional Information: Funding Information: We thank Mouhamad M. Allaya, Badar Nadeem Ashraf, Richard Kima, and Martin Martens for helpful comments and suggestions. All errors remain ours. Adam Zaremba acknowledges the support of the National Science Centre of Poland [Grant No. 2015/19/B/HS4/00378]. Publisher Copyright: © 2021 Elsevier Inc.

Keywords: COVID-19 pandemic, Coronavirus, Policy responses, Government bonds, Sovereign bond, Term spread, Term structure, Interest rates