Volatility in International Sovereign Bond Markets:: The role of government policy responses to the COVID-19 pandemic

Zaremba, Adam, Kizys, Renatas and Aharon, David Y. (2021) Volatility in International Sovereign Bond Markets:: The role of government policy responses to the COVID-19 pandemic. Finance Research Letters, 43, [102011]. (doi:10.1016/j.frl.2021.102011).

Record type: Article

Abstract

Effective government policies may reduce uncertainty in sovereign bond markets. Can policy responses help to curb bond market volatility during the COVID-19 pandemic? To answer this, we examine data from 31 developed and emerging markets during the coronavirus outbreak in 2020. We demonstrate that government interventions substantially reduce local sovereign bond volatility. The effect is mainly driven by economic support policies; the containment and closure regulations and health system interventions play no major role.

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Accepted/In Press date: 4 March 2021

Published date: 1 November 2021

Keywords: COVID-19 pandemic, Coronavirus outbreak, Government policy responses, Containment and closure, Economic support, Sovereign bonds, Government bond market volatility