Report
The Global Credit Cycle
Abstract: We estimate the global price of credit risk from a large cross section of global corporate bond returns. We show that a single factor, constructed as a nonlinear function of past credit spreads, equity market volatility, and their interactions, prices bond returns in both the time series and the cross section. The factor significantly outperforms alternative measures of global financial conditions, explaining up to 13 percent of variation in bond-level three-month-ahead returns. A high global price of credit risk further translates into deteriorations in local credit conditions, outflows from global funds, and higher expected returns to global funds.
JEL Classification: F30; F44; G12; G15;
https://doi.org/10.59576/sr.1094
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Provider: Federal Reserve Bank of New York
Part of Series: Staff Reports
Publication Date: 2024-03-01
Number: 1094
Note: Revised March 2026.