【IMF】新兴市场和发展中经济体国内主权债券收益率的财政决定因素-2025.3_40页_2mb

Summary of "Fiscal Determinants of Domestic Sovereign Bond Yields in Emerging Market and Developing Economies"

Core Content

This IMF Working Paper investigates the fiscal determinants of domestic sovereign bond yields in Emerging Market and Developing Economies (EMDEs), emphasizing the role of fiscal policy and the composition of debt holders. The paper highlights how fiscal discipline and the structure of debt financing influence borrowing costs and sovereign risk in EMDEs, particularly in the context of the post-pandemic financial environment.

Main Views

• Fiscal Policy Impact: Fiscal policy significantly affects domestic bond yields. A 1 percentage point increase in expected primary deficits leads to a persistent rise in 10-year domestic bond yields by around 36 basis points over 2.5 years, with larger effects observed during the pandemic.
• Domestic Bank Influence: The growing reliance on domestic banks for financing deficits has intensified the sovereign-bank nexus, making domestic bond yields more sensitive to fiscal expansion.
• Pandemic Shifts: The shift in debt financing towards domestic banks post-pandemic has increased the interlinkage between sovereign yields and banking sector behavior, raising potential financial sector risks.
• Foreign Investor Role: In contrast to domestic bonds, external bond spreads are more sensitive to external and global risk factors, and a higher share of foreign investor holdings tends to reduce long-term yields but increase volatility.
• Systemic Risks: The paper identifies the "doom-loop" risk, where a deep sovereign-bank nexus can amplify credit risk between the government and the banking sector.

Key Information

Data Overview

• The analysis uses domestic bond yield data from 75 EMDEs.
• Bond yields are categorized into 5-year and 10-year maturities.
• External bond spreads are sourced from the IMF Sovereign Spread Monitor (SSM).
• Data is aggregated at semi-annual frequencies and merged with IMF WEO forecasts.

Methodology

• The paper employs Panel Local Projection (LP) estimation to analyze the impulse response of bond yields to changes in expected primary deficits.
• Robustness checks are conducted using alternative forecast horizons and control variables such as financial repression, sovereign credit risk, commodity prices, and global financial conditions.
• KBO decomposition is used to estimate the heterogeneity in bond yield responses due to differences in debt holder composition.

Empirical Findings

• Baseline Results: A 1 percentage point increase in 4-year ahead primary deficits leads to a 31 bps increase in 5-year bond yields and 26 bps increase in 10-year bond yields over two years.
• Pandemic Impact: The effect on 10-year bond yields peaks at 36 bps after 2.5 years in EMDEs excluding China and India.
• Sovereign-Bank Nexus: Countries with a higher exposure of domestic banks to sovereign debt experience greater amplification of fiscal impacts on bond yields, with the marginal effect reaching 50 bps over two years in such cases.
• Control Variables: The analysis accounts for GDP growth, inflation, FX depreciation, monetary policy rates, sovereign credit ratings, and global financial conditions.

Policy Implications

• Maintaining robust fiscal positions is essential to positively influence market perceptions and borrowing costs.
• Diversification of investor base is crucial to mitigate risks associated with concentrated domestic holdings.
• Vigilant supervision of the financial sector and development of resolution frameworks are needed to avoid "doom-loops" and systemic risks.
• Financial sector leverage and government guarantees play a significant role in the transmission of credit risk between sovereign and banking sectors.

Structure and Methodology

I. Introduction

• Outlines the growing importance of domestic sovereign bonds in EMDEs.
• Highlights the need to understand how fiscal policy and debt structure influence bond yields.
• Notes the increased sensitivity of bond yields to fiscal fundamentals and the role of financial sector interlinkages.

II. Data and Background

• Data Sources: Bloomberg for bond yields, IMF WEO for macroeconomic forecasts, and SSM for external spreads.
• Debt Holder Composition: Includes domestic and foreign banks, nonbanks, central banks, and official creditors.
• Sovereign-Bank Nexus: Examines the increasing exposure of commercial banks to government debt, particularly post-pandemic.

III. Econometric Analysis

• Panel LP Estimation: Used to estimate the sensitivity of bond yields to fiscal variables.
• Control Variables: Includes macroeconomic forecasts, monetary policy rates, sovereign credit ratings, and global financial conditions.
• Robustness Checks: Conducted to ensure the reliability of results, accounting for financial repression, commodity prices, and other factors.

IV. Heterogeneity by Debt Holder Composition

• Domestic Bank Influence: Shows that domestic banks' holdings significantly amplify the impact of fiscal policy on bond yields.
• Foreign Investor Impact: Indicates that higher foreign holdings reduce long-term yields but increase volatility.
• Counterfactual Analysis: Demonstrates how changes in debt composition affect yield responses.

V. Conclusions

• Emphasizes the importance of fiscal discipline and debt diversification in managing sovereign bond yields.
• Highlights the systemic risks posed by a deep sovereign-bank nexus and the need for policy measures to prevent "doom-loops".
• Calls for vigilant supervision and financial sector reforms to enhance resilience in EMDEs.

Key Figures and Tables

• Figure 1a: Shows the increase in domestic and foreign debt holdings in EMDEs.
• Figure 1b: Illustrates the shift in foreign private investor participation in LC bond markets.
• Figure 2: Highlights the share of sovereign debt held by domestic creditors.
• Figure 3: Depicts the evolution of the sovereign-bank nexus over time.
• Table 1: Provides descriptive statistics of key variables, including bond yields, primary deficits, public debt-to-GDP, and sovereign credit ratings.

Conclusion

This paper contributes to the understanding of how fiscal policy and debt composition influence domestic bond yields in EMDEs. It underscores the increasing role of domestic banks in financing deficits and the resulting amplified impact on bond yields, especially in the context of the post-pandemic financial landscape. The findings also highlight the systemic risks from the sovereign-bank nexus and the importance of fiscal and financial sector reforms to mitigate these risks.