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Federal Reserve Bank of San Francisco
FRBSF Economic Letter
What determines the credit spread?
John Krainer

Although the swings in economic measures during the last recession and recovery were fairly modest, swings in financial markets were quite large. Once financial markets found their footing, after steep losses in 2000-2002, prices on virtually all traded financial claims rose as the economic outlook improved. This pattern was particularly true in the corporate bond market. In this Economic Letter I describe the significant narrowing of bond spreads across different sectors and ratings classes since the last recession. I also discuss recent research on the determinants of relative pricing in the corporate bond market.

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John Krainer, "What determines the credit spread?" , Federal Reserve Bank of San Francisco, FRBSF Economic Letter, number 36, 2004.
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Keywords: Corporate bonds ; Bond market
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