I show that the pricing of a bond liquidity shock depends on the current size of a firm's bond rollover exposure. Using U.S. corporate bond transactions data, I find that a market liquidity shock induces a larger yield spread increase among firms with non-zero rollover exposures. This effect is more pronounced for credit risky firms and increases in the size of the rollover exposure. Furthermore, I show that tests that do not control for the heterogeneity in firms' rollover exposure policies provide biased estimates of the pricing impact of the rollover channel.

Yield spreads and the corporate bond rollover channel

Nagler, Florian
2020-01-01

Abstract

I show that the pricing of a bond liquidity shock depends on the current size of a firm's bond rollover exposure. Using U.S. corporate bond transactions data, I find that a market liquidity shock induces a larger yield spread increase among firms with non-zero rollover exposures. This effect is more pronounced for credit risky firms and increases in the size of the rollover exposure. Furthermore, I show that tests that do not control for the heterogeneity in firms' rollover exposure policies provide biased estimates of the pricing impact of the rollover channel.
2019
Nagler, Florian
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11565/4017354
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