Connectedness and systemic risk in global government bond markets from a quantile VAR perspective

This study examines systemic connectedness and risk spillovers within global government bond markets using a quantile vector autoregression (QVAR) framework and weekly government bond yield changes from 13 major economies. The empirical analysis unveils three key dynamics. First, under normal conditions, European nations and Australia function as net risk transmitters, while Asian markets predominantly operate as net receivers. The U.S. demonstrates hegemonic systemic centrality, with participation reaching 122.95% (short-term) and 150.00% (long-term). Europe’s influence escalates along the yield curve (rising from 28.07% to 46.07%), indicating stronger aggregate connectedness in the long-term maturity segment, whereas China exhibits comparatively low connectedness under normal market conditions (5.45%–8.72%). Second, systemic risk spillovers surge during both extreme yield upswings and downswings, exhibiting a U-shaped “smile curve.” Propelled by capital flight during yield upswings and search-for-yield flows during downswings, lower-rated sovereigns (e.g., Italy, Russia, and Indonesia) transition into net risk receivers in both tail scenarios. This pattern indicates greater exposure to external spillovers in several relatively vulnerable sovereign markets under systemic stress. Finally, dynamic assessment of the 2025 U.S. tariff war illuminates that while the initial shock precipitated a sharp spike in global spillovers, smaller changes in connectedness were observed around subsequent announcements, indicating a descriptive attenuation pattern. This study reveals the term structure of global risk transmission by characterizing the nonlinear “smile curve” of tail dependence, and quantifies the “shock desensitization” effect in modern geopolitical conflicts, providing new empirical evidence on the risk contagion mechanism in global government bond markets.