How does uncertainty affect the costs of raising finance in the bond market and via bank loans? Empirically, this paper … finds that heightened uncertainty is accompanied by an increase in corporate bond yields and a decrease in bank lending … the value of the lending relationship and lowers the lending rate. Bond investors demand compensation for the increased …

Studies of bond return predictability find a puzzling disparity between strong statistical evidence of return … accounting for important features of bond return models such as time varying parameters, volatility dynamics, and unspanned macro … performance of forecast combinations. Consistent with models featuring unspanned macro factors, our forecasts of future bond …