Working Papers

U.S. Monetary Policy: The International Bond Issuance Channel

• Abstract: I study how changes in U.S. monetary policy affect the bond issuance activities of firms and consequently influence investment outcomes. Using issuance-level and firm-level data from 30 countries, I provide cross-country empirical evidence supporting the existence of a novel "International Bond Issuance Channel" for U.S. monetary policy transmission. In response to a 100 bps decrease in the U.S. interest rate, firms increase the issuance amount of newly issued bonds by approximately 15% and extend the duration by one year. This effect spills over to other countries and is not limited to dollar-denominated bonds, but local currency-denominated bonds are less affected by such shocks. The changes in issuance characteristics subsequently impact firms' investment decisions. Those that issue larger bond volumes or longer durations become less responsive to monetary policy.

• Presentations: HKU, HKMA

Country Heterogeneity in the Global Bond Cycle: A Foreign Investor Composition Perspective (with Yuyuan Zhang) 

• Abstract: We examine how the comovement of sovereign bond spreads with the global risk factors depends on the holding of different types of foreign institutional investors. We constructed a new database of foreign investor composition for sovereign bonds from 45 countries, and documented that 10% higher ex-ante insurance companies and pension funds (ICPF) ownership can reduce the impact of global risk factor on government bond yields by 37%. Additionally, we identified exogenous changes in the investor base through an event study framework, with seven inclusion and exclusion events in the JPM GBI-EM index. Our finding shows that increased holdings by investment funds in the event country result in an increased sensitivity to global risk factors following these shocks. Consequently, foreign long-term institutional investors play a crucial role in safeguarding global financial stability by insulating government borrowing costs from global risks.

• Presentations: HKU*, 12th UECE Conference*, SASCA PhD Conference*

Work in Progress

Three Patterns of EM Corporate Debt and Their Financial Stability Implications (with Jason Wu and Nassira Abbas)

• Presentations: IMF

Policy Report

IMF Global Financial Stability Report Chapter 1, Oct 2024

[link to the report]