Abstract

There is limited literature exploring the relationship between the sentiment of fear and bond markets. This study analyzes the influence of fear generated by the coronavirus on bond markets, particularly on the yield of sovereign bond debt issued by the G7 countries (Germany, Canada, the United States, France, Italy, Japan, and the United Kingdom). To accomplish this, search volumes compiled by Google Trends on the topic of coronavirus were used as a proxy for COVID-induced fear. The results from applying a panel data approach for the period from 1 January 2020 to 30 December 2020, show that this fear positively impacts the 10-year sovereign bond yield. We show that a one-point increase in COVID-induced fear was associated with an increase in the weekly change in the sovereign bond yield of around 0.0007%. Thus, we found that COVID-induced fear was associated with an increase in country risk perception. These findings have important implications for policymakers by demonstrating the importance of searching a balance between health concerns and impacts on the economy to avoid increasing country risk. In addition, the results obtained show that in times of greater fear of the coronavirus, investors can obtain higher returns by investing in safe assets, such as sovereign bonds.

摘要

探讨恐惧情绪与债券市场之间关系的文献有限。本研究分析了冠状病毒引发的恐惧对债券市场的影响，特别是对 G7 国家（德国、加拿大、美国、法国、意大利、日本和英国）发行的主权债券收益率的影响。为了做到这一点，谷歌趋势汇编的关于冠状病毒主题的搜索量被用作 COVID 引起的恐惧的代表。对 2020 年 1 月 1 日至 2020 年 12 月 30 日期间应用面板数据方法的结果表明，这种担忧对 10 年期主权债券收益率产生了积极影响。我们表明，COVID 引发的恐惧增加 1 点与主权债券收益率每周变化增加约 0.0007% 相关。因此，我们发现，COVID 引起的恐惧与国家风险认知的增加有关。这些发现通过证明在健康问题和对经济的影响之间寻求平衡以避免增加国家风险的重要性，对政策制定者具有重要意义。此外，获得的结果表明，在对冠状病毒更加恐惧的时期，投资者可以通过投资主权债券等安全资产获得更高的回报。