In this paper authors analyze how government bond prices and liquidity are affected by capital flows to the sovereign debt market. Additionally, they explore whether these flows spill over to the exchange rate market. To tackle endogeneity concerns, authors construct a measure of information free capital flows implied by mechanical rebalancings (Flows Implied by the Rebalancings - FIR) from the largest local-currency government-debt index for emerging countries. They find that FIR is positively associated with the returns on government bonds and with the depth of the sovereign debt market in the aftermath of the rebalancings. These capital flows also impact on the exchange rate market: larger inflows (outflows) are associated to larger currency appreciations (depreciations)