Flights-to-quality from EM Bonds to safe-haven US Treasury Securities: A time-frequency Analysis
Document Type
Article
Source of Publication
Emerging Markets Finance and Trade
Publication Date
1-1-2022
Abstract
We study 2001–2020 flight-to-quality episodes encompassing two planetary-scale crises: the Global Financial Crisis (GFC) of 2007–2008 and the coronavirus-triggered global meltdown. We focus on time-frequency lead-lag nexuses between holding emerging market (EM) debt and investing in relatively risk-free US Treasuries. Wavelet coherency along with the phase-difference approach is used. Our results reveal varying lead-lag patterns and low-coherence zones between EM bonds and US Treasuries, which imply the existence of appealing diversification attributes. The flights-to-quality during the crisis periods, such as the GFC and COVID-19 pandemic, emphasize the safe-haven characteristics of US Treasures. They also evidence that the post-Covid tightening of credit spreads to the pre-crisis levels is faster than the post-GFC recovery. We demonstrate that for EM debt investors, the US Treasury market allows for dynamic risk mitigation strategies during both global crises.
DOI Link
ISSN
Publisher
Informa UK Limited
Disciplines
Business
Keywords
emerging market debt, flight-to-quality, safe-haven US Treasuries, spread and total return, subprime and Covid-19 crises
Scopus ID
Recommended Citation
Gubareva, Mariya; Umar, Zaghum; Teplova, Tamara; and Vo, Xuan Vinh, "Flights-to-quality from EM Bonds to safe-haven US Treasury Securities: A time-frequency Analysis" (2022). All Works. 5231.
https://zuscholars.zu.ac.ae/works/5231
Indexed in Scopus
yes
Open Access
no
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