Sovereign bond market integration:the euro, trading platforms and globalization

We disentangle different driving factors of sovereign bond market integrationby studying yield co-movements of EMU countries, the UK, the US and 16German L¨ander in the last 15 years. At a low frequency of weeks, bondmarket integration has increased gradually in the course of the last 15 years inEMU countries, as well as the UK, the US and the German L¨ander. The euro,as well as increasing international capital flows, appear to drive low frequencyintegration. In contrast, yield adjustments to changes of the German benchmarkbond at high frequencies, i.e., 2 days, remain relatively low until October2000, when a sharp increase in integration can be observed in all samples. Theincrease in high frequency integration can be attributed to electronic tradingplatforms becoming functional. The change-over from national currenciesto the euro can not explain the dramatic increase in high frequency integration.[...] [Alexander Schulz, Guntram B. Wolff]]