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Explain why adverse conditions within one bond market (such as a particular country) commonly spread to...

Explain why adverse conditions within one bond market (such as a particular country) commonly spread to other bond markets.

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Answer #1

Lets take an example. Suppose an investor from country A has invested in the debt market of country B. And suppose some unfavorable events happen in country B and it's bond market starts to collapse. Country B's borrowers will start defaulting on its loan which means investors from country A will suffer. Also, country A's people will start defaulting on their loans because they don't have funds to payback their debt as they have lost their investment in country B. This way adverse conditions within one bond market (such as a particular country) commonly spread to other bond markets.

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Answer #2
Becomes easier for stockholders to do cross border investment
source: Banking and Finance
answered by: Shimran
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