The Ties that Bind: Measuring International Bond Spillovers Using Inflation-Indexed Bond Yields

Author/Editor:

Andrew J Swiston ; Tamim Bayoumi

Publication Date:

June 1, 2007

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper explores international bond spillovers using daily and intra-day data on yields on inflation-indexed bonds and associated inflation expectations for the United States, Australia, Canada, France, Sweden, Japan, and the United Kingdom. The analysis starts in 2002, by which point U.S. inflation-indexed markets were fully mature. Real bond yields are found to be closely linked across countries, with developments in U.S. markets determining around half of real foreign yields and no evidence of spillovers back to the United States. Spillovers in inflation expectations are smaller and the direction of causation is less clear.

Series:

Working Paper No. 2007/128

Subject:

Bond yields Inflation Inflation-indexed bonds Real interest rates Spillovers

English

Publication Date:

June 1, 2007

ISBN/ISSN:

9781451866926/1018-5941

Stock No:

WPIEA2007128

Pages:

40

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