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- Title
Decomposing corporate bond spreads.
- Authors
Webber, Lewis
- Abstract
Sterling, dollar and euro-denominated corporate bond spreads narrowed substantially between late 2002 and mid-2007, but widened abruptly during the recent financial market turmoil. This article uses a structural credit risk model to examine the extent to which movements in spreads over the past decade have been driven by credit and non-credit related factors. Compensation for bearing non-credit related illiquidity risk appears to have been a particularly important driver of high-yield spreads, including during the recent financial market turmoil, but the compensation required for credit risk has also increased recently.
- Subjects
UNITED Kingdom; CORPORATE bonds; BOND market; FINANCIAL crises; CREDIT risk; ECONOMIC conditions in Great Britain
- Publication
Bank of England Quarterly Bulletin, 2007, Vol 47, Issue 4, p533
- ISSN
0005-5166
- Publication type
Article