Sovereign bond yield and cryptocurrency returns within the frontier West African monetary zone: a dynamic contagion analysis

This study employs wavelet analysis to examine the contagion between cryptocurrency returns and sovereign bond yields within the West African Monetary Zone (WAMZ) economies, capturing both the frequency-dependent nature of the relationship and time-varying behavior. We analyze daily data spanning 01/26/2021 to 10/07/2022, with a total observable value of 444. The study selected periods of uncertainty within financial markets, namely, the COVID-19 pandemic and the Russia–Ukraine war because there was a need to understand how securities react during such times to help investors plan accordingly. Our results show a negative correlation between sovereign bond yields and cryptocurrency returns, suggesting that investors can use these asset classes as hedge agents, diversifiers, and safe-haven instruments. These findings provide valuable insights for investors and policymakers, shedding light on the potential interdependencies and diversification benefits between these two asset classes.