We propose an econometric model to decompose corporate bond spreads into compensation required by investors for unpredictable future changes in the credit environment and for expected default losses. We use the model to understand whether the significant reduction in corporate bond spreads...

Corporate bond returns in the major developed economies increase with risk, as measured by maturity and ratings. From a pricing perspective, we find little to no evidence against the World CAPM model, where the market consists out of equity, sovereign and corporate bonds. However, from a factor...

We analyse the extent to which prices in the sovereign credit default swap (CDS) and bond markets reflect the same information on credit risk in the context of the European Monetary Union. The empirical analysis is based on the theoretical equivalence relation that should hold between the CDS...

Corporate bond returns in major developed economies increase with lower ratings and higher residual maturity. The performance of various factor models featuring corporate, sovereign and equity markets as factors suggests that the corporate bond factor plays a dominant role in explaining the...

We study the impact of transparency on liquidity in OTC markets. We do so by providing an analysis of liquidity in a corporate bond market without trade transparency (Germany), and comparing our findings to a market with full posttrade disclosure (the U.S.). We employ a unique regulatory dataset...

The yield curve should reflect the time value of the money to maintain the maturity transformation of the banking system. A tightened gap between the 3 month and 10 year yields on the bond market indicates liquidity shortage. This paper analyzes such liquidity shortages at the Euro area as well...

This paper attempts to find an aggregate leading indicator to predict the spreads observed for high-yield (HY) bond indices. Using a vector error correction (VEC) specification for quarterly data, we establish a long-term equilibrium relationship between the HY market spreads and its...

The paper examines the credit spread between government and corporate bonds at different maturities. Theoretical models assume that credit risk premiums for high quality firms monotonously increase with maturity. We find evidence suggesting that bonds issued at maturities attracting the highest...

After the financial crisis deepened from September 2008, large US corporations temporarily had difficulty getting funding, but conditions have gradually improved since the beginning of 2009, in step with growth in corporate bond issuance. In the US, although nonperforming loans have hampered the...

The growth of the European financial markets, together with the new, stricter regulations on the U.S. financial markets, has spurred a debate over the competitiveness of the U.S. financial markets. In this paper, we contribute to this debate by investigating the relative competitiveness of the...