Please Mind the Spread. Impact of Sovereign Default Risk on Bond Portfolio Flows of Emerging Asian Economies during COVID-19 Pandemic

This paper examines the impact of COVID-19 pandemic on bond portfolio flows in Asian emerging market economies. We show that the outbreak of COVID-19 pandemic magnified the impact of sovereign default risk on bond portfolio outflows, it also leaded to a higher volatility of bond portfolio flows in longer term. This finding suggests that proper sovereign credit risk management might be particularly important to prevent negative impact caused by unstable bond portfolio flows during the crises.