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Corporate Yield Spreads
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Book Synopsis Liquidity and Yield Spreads of Corporate Bonds by : Sergei Ivanovich Tishchenko
Download or read book Liquidity and Yield Spreads of Corporate Bonds written by Sergei Ivanovich Tishchenko and published by . This book was released on 2004 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: Corporate bond bid-ask spreads explain 40 percent of the temporal variation in yield spreads when daily individual bond data are used. Other known yield spread determinants such as the level and slope of the treasury yield curve, aggregate equity returns and implied volatility jointly explain only 10 percent of the yield spread variation. On average, approximately 60 percent of the bid-ask spread is impounded in the corporate yield spread. The estimates of the yield spread sensitivity to bid-ask spread changes are remarkably stable across bonds with different Standard & Poor's credit grades ranging from AAA to CC. This evidence supports the view that corporate bond liquidity is an important yield spread determinant.
Book Synopsis The Economics of Corporate Bond Yield Spreads and the Yield Spread Puzzle of Recent Years by : Yogesh Patel
Download or read book The Economics of Corporate Bond Yield Spreads and the Yield Spread Puzzle of Recent Years written by Yogesh Patel and published by . This book was released on 2000 with total page 178 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Latent Liquidity and Corporate Bond Yield Spreads by : Amrut J. Nashikkar
Download or read book Latent Liquidity and Corporate Bond Yield Spreads written by Amrut J. Nashikkar and published by . This book was released on 2008 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent research has shown that default risk accounts for only a part of the total yield spread on risky corporate bonds relative to their riskless benchmarks. One candidate for the unexplained portion of the spread is a premium for the illiquidity in the corporate bond market. We investigate this issue byrelating the liquidity of corporate bonds, as measured by their ease of market access, to the non-default component of their respective corporate bond yields using the portfolio holdings database of the largest custodian in the market. The ease of access of a bond is measured using a recently developed measurecalled latent liquidity that weights the turnover of funds holding the bond by their fractional holdings of the bond. We use the credit default swap (CDS) prices of the bond issuer to control for the credit risk of a bond. At an aggregate level, we find a contemporaneous relationship between aggregate latent liquidity and the average non-default component in corporate bond yields. Additionally, for individualbonds, we find that bonds with higher latent liquidity have a lower non-default component of their yield spread. We also document that bonds that are held by funds that exhibit greater buying activity command lower spreads (i.e., are more expensive), while the opposite is true for those that exhibitgreater selling activity. We also find that the liquidity in the CDS market has an impact on bond pricing, over and above bond-specific liquidity effects.
Book Synopsis Effects of Liquidity on the Nondefault Component of Corporate Yield Spreads by : Song Han
Download or read book Effects of Liquidity on the Nondefault Component of Corporate Yield Spreads written by Song Han and published by . This book was released on 2008 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Treasury Yields and Corporate Bond Yield Spreads by : Gregory R. Duffee
Download or read book Treasury Yields and Corporate Bond Yield Spreads written by Gregory R. Duffee and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper empirically examines the relation between the Treasury term structure and spreads of investment grade corporate bond yields over Treasuries. I find that noncallable bond yield spreads fall when the level of the Treasury term structure rises. The extent of this decline depends on the initial credit quality of the bond; the decline is small for Aaa-rated bonds and large for Baa-rated bonds. The role of the business cycle in generating this pattern is explored, as is the link between yield spreads and default risk. I also argue that yield spreads based on commonly-used bond yield indexes are contaminated in two important ways. The first is that they are quot;refreshedquot; indexes, which hold credit ratings constant over time; the second is that they usually are constructed with both callable and noncallable bonds. The impact of both of these problems is examined.
Book Synopsis Corporate Bond Yield Spreads and the Term Structure by : Ronald W. Anderson
Download or read book Corporate Bond Yield Spreads and the Term Structure written by Ronald W. Anderson and published by . This book was released on 1997 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Corporate Yield Spreads and Bond Liquidity by : David A. Lesmond
Download or read book Corporate Yield Spreads and Bond Liquidity written by David A. Lesmond and published by . This book was released on 2005 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine whether liquidity is priced in corporate yield spreads. Using a battery of liquidity measures covering over 4000 corporate bonds and spanning investment grade and speculative grade categories, we find that more illiquid bonds earn higher yield spreads; and that an improvement of liquidity causes a significant reduction in yield spreads. These results hold after controlling for common bond-specific, firm-specific, and macroeconomic variables, and are robust to issuers' fixed effect and potential endogeneity bias. Our finding mitigates the concern in the default risk literature that neither the level nor the dynamic of yield spreads can be fully explained by default risk determinants, and suggests that liquidity plays an important role in corporate bond valuation.
Book Synopsis Determinants of Yield Spreads on Corporate Bonds by : Prakash Shamrao Kharabe
Download or read book Determinants of Yield Spreads on Corporate Bonds written by Prakash Shamrao Kharabe and published by . This book was released on 1983 with total page 318 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis On Estimating the Relation between Corporate Bond Yield Spreads and Treasury Yields by : Gady Jacoby
Download or read book On Estimating the Relation between Corporate Bond Yield Spreads and Treasury Yields written by Gady Jacoby and published by . This book was released on 2003 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a simple theoretical framework, we issue two warnings with respect to the estimation of the yield spread - riskless rate relation. The first warning relates to Longsta and Schwartz's regression analysis applied to relative yield spreads. The second warning is closely related to Duffee's (1998) caution against interpreting results of yield-spread studies based on data sets, such as that used by Longstaand Schwartz (1995), consisting primarily of callable bonds. We provide strong support for both warnings using a data base of Canadian, investment grade, corporate bond indices containing a unique provision allowing to identify callable and noncallable indices.
Book Synopsis Corporate Bond Yield Spreads in Recent Decades by : Douglas J. Lamdin
Download or read book Corporate Bond Yield Spreads in Recent Decades written by Douglas J. Lamdin and published by . This book was released on 2003 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: Corporate bond interest rates are a subject of concern to investment analysts, corporate financial managers, and scholars. In this article the yield spreads between corporate bonds and government bonds, and between differing quality corporate bonds is examined during recent decades. Also, the relationship between yield spreads and stock market movements is examined. Yield spreads vary considerably over this period, and have varying trends. Causality tests show that stock market movements precede changes in yield spreads.
Book Synopsis Testing for the Elasticity of Corporate Yield Spreads by : Jonathan A. Batten
Download or read book Testing for the Elasticity of Corporate Yield Spreads written by Jonathan A. Batten and published by . This book was released on 2008 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: The correlation between interest rates and corporate bond yield spreads is a well-known feature of structural bond pricing models. Duffee (1998) argues that this correlation is weak once the effects of call options are removed from the data; a conclusion that contradicts the negative correlation expected by Longstaff and Schwartz (1995). However, Elton et al. (2001) point out that Duffee's analysis ignores the effects of the tax differential between U.S. Treasury and corporate bonds. Canadian bonds have no such tax differential, yet, after controlling for callability, the correlation between riskless interest rates and corporate bond spreads remains negligible. We also find a significant negative relationship for callable bonds that increases with the moneyness of the call provision. These results are robust under alternate empirical specifications. Our results therefore provide support for reduced-form models that explicitly define a default hazard process and untie the relation between the firm's asset value and default probability.
Book Synopsis Stock Liquidity and Corporate Bond Yield Spreads by : Henry Hongren Huang
Download or read book Stock Liquidity and Corporate Bond Yield Spreads written by Henry Hongren Huang and published by . This book was released on 2016 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the impact of individual stock liquidity on corporate bond yield spreads in the U.S. market. By extending the endogenous-default model to include stock liquidity in the calculation of the bond value we show that a drop in stock liquidity will increase the firm's credit risk by increasing the firm's default boundary, leading to an increase of the credit spread. Our model is consistent with the sharp increase of credit risk premiums and the “yield spread spike” phenomenon in corporate bond markets during the financial crisis. We present empirical evidence supportive of our model.
Book Synopsis Default Risk, Default Risk Premiums, and Corporate Yield Spreads by : Georges Dionne
Download or read book Default Risk, Default Risk Premiums, and Corporate Yield Spreads written by Georges Dionne and published by . This book was released on 2006 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: An important research area of the corporate yield spread literature seeks to measure the proportion of the spread explained by various factors such as the possibility of default, liquidity or tax differentials. We contribute to this literature by assessing the ability of observed macroeconomic factors and the possibility of changes in regimes to explain the default risk proportion in yield spreads. For this purpose, we extend the Markov Switching risk-free term structure model of Bansal and Zhou (2002) to the corporate bond setting and develop recursive formulas for default probabilities, risk-free and risky zero-coupon bond prices. The model is calibrated with consumption, inflation, risk-free yield and default data over the 1987-1996 period. Preliminary results show that up to 64% of the ten years corporate yield spread for industrial Baa is explained by the possibility of default.
Book Synopsis US Corporate Bond Yield Spread. A Default Risk Debate by : Syed Noaman Shah
Download or read book US Corporate Bond Yield Spread. A Default Risk Debate written by Syed Noaman Shah and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Industry-specific Characteristics of Cyclical Variations in the Yield Structure of Corporate Bonds by : Delvin D. Hawley
Download or read book Industry-specific Characteristics of Cyclical Variations in the Yield Structure of Corporate Bonds written by Delvin D. Hawley and published by . This book was released on 1987 with total page 460 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Investing in Corporate Bonds and Credit Risk by : F. Hagenstein
Download or read book Investing in Corporate Bonds and Credit Risk written by F. Hagenstein and published by Springer. This book was released on 2004-10-01 with total page 355 pages. Available in PDF, EPUB and Kindle. Book excerpt: Investing in Corporate Bonds and Credit Risk is a valuable tool for any corporate bond investor. All the most recent developments and strategies in investment in corporate bonds are analyzed included with qualitative and quantitative approaches. A complete and up-to-date investment process is developed through the book, using many examples taken from banking practice. The growing significance of derivative instruments and credit diversification to bond investors is also analyzed in detail.
Book Synopsis The Long-Run Impact of Sovereign Yields on Corporate Yields in Emerging Markets by : Delong Li
Download or read book The Long-Run Impact of Sovereign Yields on Corporate Yields in Emerging Markets written by Delong Li and published by International Monetary Fund. This book was released on 2021-06-04 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze the long-run impact of emerging-market sovereign bond yields on corporate bond yields, finding that the average pass-through is around one. The pass-through is larger in countries with greater sovereign risks and where sovereign bonds are more liquid. It is also greater for corporate bonds with lower ratings, shorter maturities, and for those issued by financial companies and government-related firms. Our results support theoretical arguments that corporate and sovereign yields are linked together through credit risks and liquidity premiums. Consequently, high sovereign risks may slowdown growth by persistently increasing private sector borrowing costs.
