This study evaluates the sensitivity of government bond yields from the countries most affected by the COVID-19 pandemic to variations in some international risk factors during the period between January 2020 and April 2021. This sample period allows us to focus the study on the first, and the subsequent waves of the COVID-19 pandemic. Specifically, we propose an extended risk factor model estimated using the quantile regression approach. In addition, this study compares the COVID-19 pandemic period with a pre-pandemic and a post-vaccination period. Interesting differences among them are observed, remarking that gold is the key risk factor during the pandemic, whereas VIX and crude oil play that role in the pre-pandemic and the post-vaccination periods, respectively, mainly for bearish states. As expected, the explanatory power of the model is better at extreme quantiles, showing relevant differences between sensitivities, because the found effects are quantile-, country- and risk factor-dependent. The results during the pandemic are robust to the inclusion of a country-specific factor and a factor accounting for the mutual influence of the government bonds.
Keywords: COVID-19 pandemic; bond returns; quantile regression; risk factors.