Emerging Government Bond Market Timing
Johan G. Duyvesteyn
Robeco Asset Management; Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)
Erasmus University Rotterdam (EUR); Robeco Asset Management
January 16, 2014
Journal of Fixed Income, Vol. 23, No. 3, 2014
Excess bond returns in developed markets are predictable using factors like bond momentum, equity momentum and term spread. We show the same factors can also predict emerging government bond returns of debt issued in local currency. An investment strategy based on the three factors delivers 1.2% outperformance per year after transaction costs. Emerging market local currency debt returns are positively correlated with U.S. treasury returns and have near-zero correlation with U.S. credit excess returns. These results indicate that emerging market local currency debt behaves more like developed government bond debt and less like credits.
Keywords: Market timing, emerging debt, government bonds, bond momentum
JEL Classification: G14, G15Accepted Paper Series
Date posted: February 16, 2013 ; Last revised: February 20, 2014
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