^*Tamim Bayoumi is a senior advisor with the IMF Strategy, Policy, and Review Department, and Andrew Swiston is an economist with the IMF Western Hemisphere Department. The authors gratefully acknowledge extremely helpful comments on this paper from two seminars at the IMF.

Abstract

This paper explores international bond spillovers using daily and weekly data on yields on inflation-indexed bonds and associated inflation expectations for the United States, Australia, Canada, France, Sweden, Japan, and the United Kingdom. The analysis starts in 2002, by which point U.S. inflation-indexed markets had matured. Real bond yields are found to be closely linked across countries, with developments in U.S. markets determining around half of real foreign yields and no evidence of spillovers back to the United States. Spillovers in inflation expectations are smaller and the direction of causation is less clear.