Economic policy uncertainty (EPU) has emerged as a critical variable influencing financial markets, especially bond returns. The relationship between EPU and bond returns is rooted in theories of asset pricing, risk premiums, and market behaviour under uncertainty. There are varying conclusions about the EPU’s effect on bond returns across business cycles. In some instances, for example, during recessions, EPU increased the likelihood of low-return regimes for corporate bonds, while government bond prices rose due to increased demand for safe assets. In this study, the Markov Switching regime was used to analyse the asymmetric nature of the EPU in relation to bond market returns. The study demonstrates that the EPU bond returns response is regime-dependent and segment-specific […]