Sovereign bond yields in emerging Asia: New evidence

Abstract

This paper studies the determinants of sovereign bond yields in nine emerging Asian countries over the period 1994-2012. In the long-run, we first reveal that sovereign bond yields weakly and negatively depends on the changes in public debt. This result is not consistent with the theoretical hypothesis that rising government debt may foster sovereign bond yields through the default risk. Second, we fail to find out a long-run relationship between potential economic growth and sovereign borrowing costs in emerging Asia. Lastly, this paper evidences the preliminary interventions of emerging Asian authorities in separating government debt management from monetary management.