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The American Empire in a Changing World



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Saturday, August 18, 2012

''Who owns government bonds these days?''

From Bond Vigilantes

''The IMF recently released a working paper entitled “Government Bonds and Their Investors: What are the Facts and Do They Matter?” which helps shine a light on whether a change in the investor base in recent years has had an impact on yields. One of the key trends since the onset of the crisis has been a shift in the ownership of government bonds from foreign holders back to domestic holders. This can partly be explained by the various forms of quantitative easing that central banks have embarked on and a move by banks to hold more government bonds.

The IMF find that an increasing share of non-resident investors is associated with lower yields. The econometric results show that an increase (decrease) in non-resident investors by 10 percentage points is associated with a reduction (increase) in 10-year government bond yields of between 32 to 43 basis points, whereby the effect is closer to 66 basis points for euro area countries. With that finding in mind, let’s look at the proportion of non-resident holdings of government bonds across the countries.''

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