Global Green Bond Market Amid Global Turbulence

Amid the recent turbulence in the global economy, it seems very important to continue following the global environmental course. The COVID-19 pandemic, disruptions and overhaul of global supply chains, geopolitical tensions, and energy inflation of 2022 are holding back the progressive development of the world economy, which needs financial resources to continue the energy transition and other sustainable transformations. Green bonds attracted significant funds even before the pandemic. Thus, it seems timely to assess the impact of the main factors of global turbulence on the global green bond market and, based on the available data, predict the probable direction of the development of the global green bond market. The methods of analysis include general scientific, statistical, and econometric methods based on data from the Climate Bond Initiative, the World Bank, and S&P Global—power trend, logarithm, and the least squares method. The analysis showed that the challenges of adapting green bonds to the new global environment are out of the question. During COVID-19, there was a large-scale increase in issues and interest in green bonds caused by government incentives and the global financial market trends during the pandemic. In 2022, additional force majeure and more fundamental factors, such as global inflation and changes in the direction of monetary regulation frameworks in developed countries, have been added to the need to fight global warming. They had the opposite effect. However, econometric modeling shows an upward trend for the global green bond market, at least in the short term. © 2023, The Author(s), under exclusive license to Springer Nature Switzerland AG.

How Do the Financial Markets Respond to India's Asset Purchase Program? Evidence from the COVID-19 Crisis

This study examines the impacts of India's unconventional monetary policy on the exchange rate, stock market, and bond market during the COVID-19 crisis. The Reserve Bank of India announced an asset purchase programs (APPs) four times during the pandemic. Using daily data from January 1, 2019, to August 13, 2021, and applying the EGARCH methodology, this study finds that the APPs effectively reduced the yield rate in the bond market and its volatility. However, the first two announcements did not impact the financial market significantly. In contrast, the third and fourth announcements helped to compress the yield rate and its volatility. Further, the AAPs also helped to restrain the exchange rate depreciation and its volatility. Overall findings suggest that APPs had a desired impact on the targeted variables.

The role of the COVID-19 pandemic in time-frequency connectedness between oil market shocks and green bond markets: Evidence from the wavelet-based quantile approaches.

This study contributes to the existing literature on the relationship between oil market shocks and the green bond market by investigating the impact of the COVID-19 pandemic on their dynamic correlation. We first decompose the oil market shocks into components using a time-frequency framework. Then, we combine wavelet decomposition and quantile coherence and causality methods to discuss changes during the COVID-19 era. We observe positive effects of both supply-driven and demand-driven oil shocks on the green bond market at most quantile levels. However, supply-driven oil price changes play a major role. The results also indicate that long-term changes have a greater impact than short-term changes on the connection between oil and green bond markets. Nevertheless, the COVID-19 pandemic changed the nature of the causal relationship, as we observed no relationship under extreme market conditions during the pandemic era. We argue that the economic and social impacts of the COVID-19 pandemic have left investors focusing on the short-term substitution between oil and green bond markets.

The extreme return connectedness between Sukuk and green bonds and their determinants and consequences for investors

This study aimed to investigate the return connectedness between Sukuk and green bonds at the middle, left and right tail using the new quantile-based connectivity methodology from Ando et al. (2018). We find that the average level of connectedness estimated at the mean/median is lower than that estimated at the left and right quantiles. Therefore, return connectedness between Sukuk and green links is higher in the left and right tails, indicating that the application of the mean-based connectivity measure is inappropriate. Next, we show that the connectedness of returns varies over time but varies less in the tails. In particular, the dynamic connectivity analysis indicates that the COVID-19 pandemic has significantly impacted the Sukuk and green bond markets. The Return connectedness driver's analysis shows the importance of macroeco-nomic conditions, particularly in the middle and lower quintiles. The US dollar bodes well positively for both bears and bulls, while uncertainty in equity markets amplifies return spillovers in the lower quintile. Moreover, the weak return spillovers between Sukuk and green bonds in-dicates that there is indeed an opportunity for optimal asset allocation. The highest hedging ef-ficiency can be achieved by taking short positions in US Green Bonds.

A Study on BNM-cBLSTM for Financial Sentiment Analysis in European Bond Markets Based on mpBC-ELMo

Economic and fiscal policies devised by international organizations, governments, and central banks rely significantly on economic projections, particularly during times of economic instability such as the one we have recently seen with the COVID-19 virus spreading globally. However, the accuracy of economic forecasting and now casting models remains a challenge since modern economies are prone to multiple shocks that make forecasting and now casting activities extremely difficult, both in the short and medium range. The purpose of the paper is to identify the key aspects, which must be taken into account in big data sentiment analysis to solve the problem of forecasting and now casting tasks. The work has developed an mpBC-ELMo based BNM-cBLSTM for financial sentiment analysis in European Bond markets. The proposed framework is processed based on collection of big data that are formed into a corpus. Initially, the corpus data is subjected to preprocessing, which performs tokenization, Lemmatization, URL removal, punctuations removal, Dependency Parsing, Noun Phrases, Named Entity recognition, and Coreference Resolution in order to make the data healthier and to get a potential impact for analyzing the sentiments. Thereafter, the data is converted into a vector using mpBC-ELMo, which addresses the complex characteristics of the word as well as polarity and handles stock bond correlation invariant, behavioral biases. Finally, BNM-cBLSTM analyses the sentiments and provides an accurate as well as optimized improvisation. In comparison to existing state-of-the-art methods, experimental results show that the work tends to deliver a precise sentiment analysis and avoids erroneous prediction rate. © 2022 IEEE.

The extreme return connectedness between Sukuk and green bonds and their determinants and consequences for investors

This study aimed to investigate the return connectedness between Sukuk and green bonds at the middle, left and right tail using the new quantile-based connectivity methodology from Ando et al. (2018). We find that the average level of connectedness estimated at the mean/median is lower than that estimated at the left and right quantiles. Therefore, return connectedness between Sukuk and green links is higher in the left and right tails, indicating that the application of the mean-based connectivity measure is inappropriate. Next, we show that the connectedness of returns varies over time but varies less in the tails. In particular, the dynamic connectivity analysis indicates that the COVID-19 pandemic has significantly impacted the Sukuk and green bond markets. The Return connectedness driver's analysis shows the importance of macroeconomic conditions, particularly in the middle and lower quintiles. The US dollar bodes well positively for both bears and bulls, while uncertainty in equity markets amplifies return spillovers in the lower quintile. Moreover, the weak return spillovers between Sukuk and green bonds indicates that there is indeed an opportunity for optimal asset allocation. The highest hedging efficiency can be achieved by taking short positions in US Green Bonds.

How Do the Financial Markets Respond to India’s Asset Purchase Program? Evidence from the COVID-19 Crisis

This study examines the impacts of India’s unconventional monetary policy on the exchange rate, stock market, and bond market during the COVID-19 crisis. The Reserve Bank of India announced an asset purchase programs (APPs) four times during the pandemic. Using daily data from January 1, 2019, to August 13, 2021, and applying the EGARCH methodology, this study finds that the APPs effectively reduced the yield rate in the bond market and its volatility. However, the first two announcements did not impact the financial market significantly. In contrast, the third and fourth announcements helped to compress the yield rate and its volatility. Further, the AAPs also helped to restrain the exchange rate depreciation and its volatility. Overall findings suggest that APPs had a desired impact on the targeted variables. © 2022 Taylor & Francis Group, LLC.

Is There a Greenium in Korean Bond Markets?: An Empirical Analysis of Bond Secondary-Market Trading Data*

We examine the secondary-market bond trading data from May 2018 to December 2021 to see if there exists a green premium or ‘greenium’ in Korean bond markets. We employ two empirical approaches — a matched sample analysis that compares green bonds with matched conventional bonds of similar characteristics, and a regression model that controls for the fixed effects related to issuer, maturity, credit rating, and trading year and month. We find the existence of a greenium in Korean debt markets with strong chronological trends. The greenium is observed prior to the outbreak of the Covid-19 pandemic but disappears during the outbreak period. The greenium then reappears distinctly after the government’s declaration of carbon neutrality near the end of Year 2020. Our study is the first that empirically examines the existence of green premium in the Korean bond markets based on a reasonably large sample size. The strong greenium reported in our study justifies the existence and expansion of green bond markets in Korea. It also offers valuable additional evidence to the academic discourse on green premium in global debt markets. © 2022, Korean Securities Association. All rights reserved.

The Impact of COVID-19 Pandemic on Government Bond Yields

The COVID-19 pandemic is a real shock to society and business and financial markets. The government bond market is an essential part of financial markets, especially in difficult times, because it is a source of government funding. The majority of existing ESG studies report positive impacts on corporate financial performance regarding environmental, social, and governance. Thus, understanding governments’ financial practices and their relevant ESG implications is insufficient. This research aims to value the impact of the COVID-19 pandemic on different government bond curve sectors. We try to identify the reactions to the COVID-19 pandemic in the government bond market and analyze separate tenors of government bond yields in different regions. We have chosen Germany and the United States government bond yields of 10, 5, and 3 years tenor for the analysis. As independent variables, we have chosen daily cases of COVID-19 and daily deaths from COVID-19 at the country and global levels. We used daily data from 02 January 2020–19 March 2021, and divided this period into three stages depending on the COVID-19 pandemic data. We employed the methods of correlation-regression analysis (ordinary least squares and least squares with breakpoints) and VAR-based impulse response functions to evaluate the effect of the COVID-19 pandemic on government bond yields both in the long and short run. Our analysis revealed the impact of the spread of the COVID-19 pandemic on government bond yields differs depending on the country and the assessment period. The short-term responses vary in direction, strength, and duration;the long-term response of Germany’s yields appeared to be more negative (indicating the decrease of the yields), while the response of the United States yields appeared to be more positive (i.e., increase of yields). Copyright © 2022 Zhou, Teresienė, Keliuotytė-Staniulėnienė, Kanapickiene, Dong and Kaab Omeir.

The existence of flight-to-quality under extreme conditions: Evidence from a nonlinear perspective in Chinese stocks and bonds' sectors

The COVID-19 pandemic has showed that distress to the financial system is always accompanied with the interconnection between the stock and bond markets. However, limited studies have identified the flight-toquality effect between these two markets from a nonlinear extreme perspective. Thus, using the multi-quantile VaR Granger causality test that measures the non-linearity of extreme risk, we investigated this effect in Chinese sectors via extreme risk spillover networks. Based on the findings, defensive (offensive) sectors are dominant in the stock market when facing upside (downside) risk to avoid potential investment losses. The results also confirm the robustness of the conclusion that the investment function of the financial markets weakened during the financial crisis. Moreover, compared to the Financial Bond and Enterprise Bond, the Government Bond is likely to show better risk hedging effect in cross-market risk spillover networks due to its high information transparency.

Effect of economic policies on the stock and bond market under the impact of COVID-19

The global epidemic of COVID-19 has made a huge impact on global health and financial markets. And the spread of the virus has stalled economic development in many parts of the world. As stocks and bonds are two important financial assets, how to take appropriate economic policies to restore the stock and bond markets is the focus of governments as they are seeking for quick recovery. Based on the Event Study method and the GARCH model, data from 1 October 2019 to 1 April 2020 were collected from 26 countries or regions as analytic samples. The results show: 1) COVID-19 has made greater impacts on the stock market than the bond market;2) the economic policy responses after the COVID-19 has brought impacts on both of the stock and the bond markets;3) the monetary policy responses has brought greater volatility to the stock market than the fiscal policy responses, while the fiscal policy responses has brought greater volatility to the bond market than the monetary policy;4) the fiscal policy has brought more positive effects on the stock market, and monetary policy has brought more positive effects on the bond market. This research is helpful to understand the mechanism of COVID-19′s impacts on the stock and bond market. And it is of great practical significance to the governments’ decisions to make economic policy responses after an epidemic. © 2021

What motivates retail investors to invest in government-issued digital sukuk during COVID-19?

Purpose To analyse Sukuk Prihatin (SP), the first-ever retail digital sukuk issued by the Government of Malaysia in the midst of the COVID-19 pandemic, as part of the national economic recovery plan. The issuance of SP was oversubscribed, even upsized, resulting in the government announcing its intention to issue similar types of sukuk in the future. In light of this, the purpose of this study is to understand the motivation for retail investors to invest in SP. Design/methodology/approach The purposive sampling method was applied via a self-administered survey, while the cross-sectional data were empirically tested using the SmartPLS 3.2.9 structural equation modelling. An integrated model of the theory of planned behaviour and social cognitive theories was used in determining investors' intention to invest in SP. Findings The findings of this research revealed that attitude (ATT) towards SP investment (SPI), social norms (SN), perceived control (PBC) regarding SPI, sukuk features (SF), tax incentives (TI) and the spirit of unity and brotherhood (SUB) were significant determinants of investors' willingness to invest in SP. This research also provided evidence for significant national pride-moderated interactions of ATT, SN, PBC, SF, TI and digitisation on investment intention. Practical implications The outcome of this study could assist governments and policymakers to structure sukuk and other debt-based capital market products to attract retail investors who would be willing to invest in the development of the nation in the midst of a crisis. Originality/value This study is the first of its kind to investigate various relevant predictors, which have been derived from behavioural, contextual and motivational perspectives. These predictors could influence investors' perceptions of an innovative sukuk like SP, which was issued in the midst of a pandemic. The value of this study is its possible use by governments and policymakers to further develop debt-based capital market products that have the dual function of an investment vehicle and a source of funds for the economic recovery of a nation.

A Network Approach to the Study of the Dynamics of Risk Spillover in China's Bond Market.

Since 2018, the bond market has surpassed the stock market, becoming the biggest investment area in China's security market, and the systemic risks of China's bond market are of non-negligible importance. Based on daily interest rate data of representative bond categories, this study conducted a dynamic analysis based on generalized vector autoregressive volatility spillover variance decomposition, constructed a complex network, and adopted the minimum spanning tree method to clarify and analyze the risk propagation path between different bond types. It is found that the importance of each bond type is positively correlated with liquidity, transaction volume, and credit rating, and the inter-bank market is the most important market in the entire bond market, while interest rate bonds, bank bonds and urban investment bonds are important varieties with great systemic importance. In addition, the long-term trend of the dynamic spillover index of China's bond market falls in line with the pace of the interest rate adjustments. To hold the bottom line of preventing financial systemic risks of China's bond market, standard management, strict supervision, and timely regulation of the bond markets are required, and the structural entropy, as a useful indicator, also should be used in the risk management and monitoring.

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

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.