Public Development Banks and Green Bond Market Development
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This paper makes a summary of China's interbank bond market performance in 2007, in terms of bond issuing size, outstanding bonds, repo transaction, cash-bond turnover, bond forwards, bond FRA and bond lending. It also briefly dwells on the operation of the exchange bond market. Based on this, the author points out the features of the bond market operation and makes general judgments on the bond market operation in 2007.
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The green bond market shows good potential to help mobilize financial sources towards sustainable investments. Green bonds are similar to conventional bonds but are specifically created to raise money to finance climate or other environmental projects. The relevance of the paper is underpinned by mixed evidence on the existence of ‘greenium in various corporate bond markets and lack of a clear understanding of the green bond yields’ determinants. The objective of the paper is to explore the existence and determinants of greenium in Europe. Our sample included 3,851 green and conventional bonds in the European debt markets over the period from 2007 to 2021. The results showed that the climate corporate bonds in Europe are priced at discount to the same-risk conventional corporate bonds. The magnitude of greenium in whole European green bond market was around 4 bps. However, we did not find the significant greenium in the green bond markets of the UK, France, Netherlands, and Germany. The conclusions of the research could lead to a better understanding of the green bond market for investors, regulators, and potential issuing companies.
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Abstract We use green bonds as an instrument to identify the effect of non-pecuniary motives, specifically pro-environmental preferences, on bond market prices. We perform a matching method, followed by a two-step regression procedure, to estimate the yield differential between a green bond and a counterfactual conventional bond from July 2013 to December 2017. The results suggest a small negative premium: the yield of a green bond is lower than that of a conventional bond. On average, the premium is -2 basis points for the entire sample and for euro and USD bonds separately. We show that this negative premium is more pronounced for financial and low-rated bonds. The results emphasize the low impact of investors’ pro-environmental preferences on bond prices, which does not represent, at this stage, a disincentive for investors to support the expansion of the green bond market.
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Bond option transactions from a hedging perspective are currently almost non-existent in the South African bond and bond option market. As a result of comments and suggestions made by academics and independent observers a study was conducted in the South African bond options market amongst former and current bond option traders. The goals of the present study was to establish if bond options can be an effective hedging tool in the South African bond market, to conduct empirical tests on the basic option hedging strategies to ascertain these particular strategies’ suitability as hedges against investment risk by using actual market movements in the South African bond market, and to formulate recommendations that could be implemented to re-establish bond options as a viable hedging instruments in South Africa and also introduce it to Africa.
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Green bonds represent an important financial instrument for the allocation of financial resources towards a more climate-friendly and sustainable economy. This research evaluates and compares the financial performance of portfolios of green bonds, conventional bonds and black bonds issued on the international market. Overall, bond portfolios perform similarly to each other and to the benchmark. The results also show that black bond portfolios bear more default risk and are more sensitive to the equity market than other bond portfolios. We further analyze the conditional effect of climate risk and find evidence of time-varying bond portfolio performance according to climate policy uncertainty. Although green bond portfolios underperform in times of lower uncertainty, they significantly improve their performance and even outperform their matched black bond counterparts when concerns surrounding climate risk rise.
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<p>At present, the development of China's bond market is becoming more and more mature. However, with the continuous expansion of bond trading scale and the innovation of bond products, the risks existing in the transaction are also gradually increasing. Therefore, financial institutions, as the main investors in the bond market, should pay more attention to the measurement and avoidance of risks. Credit spread is an indicator of risk measurement. This paper compares the credit spread of four kinds of bonds through the statistics of their yields, and makes a simple analysis of their risks. Moreover, some suggestions are put forward for the bond investment of financial institutions, which may help them better avoid risks and make reasonable bond investment.</p>
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This article examines whether there is a correlation between the government bond markets of Asian countries and those of the USA, and whether the efforts of international organizations to improve bond markets have had any effect in East Asia. Because the sizes of the government bond markets are larger than those of the corporate bond markets in East Asia, the present paper uses the daily data of government bonds to examine two questions: whether government bond yields in Hong Kong, Singapore and Thailand correlate with US government bond yields, and whether bonds in these Asian countries are influenced by ADB bond issues. The present study analyzes these issues by demonstrating the fluctuations in bond yields and carrying out an estimation using the exponential generalized autoregressive conditional heteroskedasticity model. The results substantiate that there is indeed a correlation between Asian and US bond markets, and that ADB bond issuance in local markets can contribute to the development of Asian bond markets.
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Green bonds are seen as a key instrument to unlock climate finance. While their volume has grown steadily in recent years, the impact of the ‘green' label on the bond market is poorly understood. Here, we investigate the differences between the yield term structures of green and conventional bonds in the US municipal bond market. We show that, although returns on conventional bonds are on average higher than for green bonds, the differences can largely be explained by the fundamental properties of the bonds. Historically, green bonds have been penalized on the municipal market, being traded at lower prices and higher yields than expected by their credit profiles. In recent years, however, the credit quality of municipal green bonds has increased and the premium turned positive. Green bonds are thus becoming an increasingly attractive investment, with scope to bridge the climate finance gap for mitigation and adaptation.
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