A surge in structured finance in Asia and the Pacific has been driven by the securitisation of consumer loans and mortgages, a largely liquidity transforming activity. The securitisation of corporate debt in the region has so far seen relatively few deals but has a largely untapped potential to...

Sovereign spreads can be broken up into two components=the expected loss from default and the risk premium, with the latter reflecting how investors price the risk of unexpected losses. We show that the risk premium is often the larger part of the spread.

Corporate bond markets in Asia differ widely in size. Some primary markets have opened up to foreign issuers while others have relied on quasigovernment issuers. Secondary markets often suffer from illiquidity, due in varying degrees to narrow investor bases, inadequate microstructures and a...

We analyse carry trades involving the Australian dollar, Indonesian rupiah, Indian rupee, New Zealand dollar and Philippine peso as target currencies. We find evidence supporting the view that downside risk is an important feature of such strategies and propose ways of measuring this risk.

Credit rating agencies make multiple announcements, some of which are intended to reflect the latest information available about a firm and others of which are intended to provide a stable signal of credit quality. Using data on CDS spreads, we examine which of these different types of rating...

Why are spreads on corporate bonds so wide relative to expected losses from default? The spread on Baa-rated bonds, for example, has been about four times the expected loss. We suggest that the most commonly cited explanations – taxes, liquidity and systematic diffusive risk – are...

Why are spreads on corporate bonds much wider than would be implied by expected losses from default? Previous explanations of this puzzle have assumed that investors can diversify away the risk that actual losses in a corporate bond portfolio will exceed expected losses. However, the skewness in...

Are all two-factor, term-structure models the same? The authors specify three models and estimate each on different parts of the U.S. yield curve. The exercise provides insights on reconciling the term structure's time series with its cross section and on relating it to fundamentals. The...

We analyse high-frequency responses of the US yield curve to macroeconomic announcements, exploiting the high signal-to-noise ratios of these events. Surprises in the announcements evoke relatively weak reactions from the short maturities and the strong ones from the intermediate maturities....

In creating a regional bond fund, central banks in East Asia and the Pacific worked to reduce impediments in eight local markets. Moreover, they built into the fund's structure an incentive mechanism for reducing impediments further.