An Analysis of the Relationship between International Bond Markets

Bank of England Working Paper No. 123

Cass Business School Research Paper

36 Pages Posted: 27 Jan 2001

See all articles by Andrew Clare

Andrew Clare

City University London - Sir John Cass Business School

Ilias Lekkos

Bank of England

Date Written: December 2000

Abstract

It is frequently suggested that the globalisation of financial markets has been responsible for reducing the scope for independent monetary policy action by strengthening the relationship between national fixed income markets. An associated concern is that the linkages between these markets become stronger in times of financial market stress. This paper reports a decomposition of the relationship between the government bond markets of Germany, the United Kingdom and the United States. It is found that the yield curves for each of these markets are influenced by international factors. Furthermore the impact of these increases significantly during times of financial stress. It is also found that while the total covariation between these markets is relatively stable, components of the covariance can vary substantially over time.

Suggested Citation

Clare, Andrew D. and Lekkos, Ilias, An Analysis of the Relationship between International Bond Markets (December 2000). Bank of England Working Paper No. 123; Cass Business School Research Paper. Available at SSRN: https://ssrn.com/abstract=258021 or http://dx.doi.org/10.2139/ssrn.258021

Andrew D. Clare (Contact Author)

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Ilias Lekkos

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

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