Currency News and International Bond Markets

We use a sample of 27 countries and 63 currency news announcements in an event study framework to examine the impact of currency news on international government bond markets. Our findings reveal a significant spillover of currency news into bond markets. Specifically, the evidence shows significant negative abnormal bond returns, whether measured in dollar terms or local currency terms, implying that currency news plays a role in changing the performance of international government bond markets. We also show that abnormal bond returns remain significantly negative even after controlling for macroeconomic variables. Our results are robust to using alternative risk model specifications, country-level data, and corporate bond data. Our evidence of the significant impact of currency news on bond markets provides essential insights to professional traders, policymakers, and academic researchers