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Working Paper
Non-monetary news in Fed announcements: Evidence from the corporate bond market
Smolyansky, Michael; Suarez, Gustavo A. (2025-01-31)
When the Federal Reserve tightens monetary policy, do the prices of riskier assets fall relative to safer assets? Or, do investors interpret policy tightening as a signal that economic fundamentals are stronger than they previously believed, thus leading riskier assets to outperform? We present evidence that the latter of these two forces empirically dominates within the U.S. corporate bond market. Following an unanticipated monetary policy tightening, riskier corporate bonds outperform safer corporate bonds, demonstrating the importance of an informational, or nonmonetary, component within ...
Finance and Economics Discussion Series , Paper 2021-010r1

Journal Article
The truth about junk bonds
Becketti, Sean (1990-07)
Economic Review , Volume 75 , Issue Jul , Pages 45-54

Working Paper
How Does Monetary Policy Affect Prices of Corporate Loans?
Kwak, Seung (2022-02-25)
We study the impact of unanticipated monetary policy news around FOMC announcements on secondary market corporate loan spreads. We find that the reaction of loan spreads to monetary policy news is weaker than that of bond spreads: following an unanticipated monetary policy tightening (easing) shock, loan spreads do not increase (decrease) as much as bond spreads do. Decomposition of the spreads into compensations for expected defaults and risk premiums shows that differential reactions of loan and bond risk premiums are the main driver of the differential spread reactions. We further find ...
Finance and Economics Discussion Series , Paper 2022-008

Journal Article
Event risk premia and bond market incentives for corporate leverage
Zimmer, Steven A. (1990-04)
Quarterly Review , Volume 15 , Issue Spr , Pages 15-30

Journal Article
Economic factors, monetary policy and expected returns on stocks and bonds
Booth, Lena Chua; Booth, James R. (1997)
This paper examines the impact of the stance of monetary policy on security returns. The two measures of the stance of monetary policy used, the federal funds rate and an index based on the changes in the discount rate, contain significant information that can be used to forecast expected stock and bond portfolio returns. Specifically, we find that a restrictive (expansive) monetary policy stance decreases (increases) returns of large and small stock portfolios and in some cases, corporate bond portfolios. The monetary policy stance measures have explanatory power in forecasting stock and ...
Economic Review

Journal Article
Junk bonds: why now?
Pozdena, Randall (1987)
FRBSF Economic Letter

Journal Article
What determines the credit spread?
Krainer, John (2004)
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 ...
FRBSF Economic Letter

Journal Article
Quality spreads in the bond market
Schmid, Frank A. (1999-07)
Monetary Trends , Issue Jul

Corporate Bond Spreads and the Pandemic IV: Liquidity Buffers
Ebsim, Mahdi; Kozlowski, Julian; Faria-e-Castro, Miguel (2020-06-12)
The cost of borrowing rose for most firms during the pandemic-related disruption of financial markets, but firms with greater liquidity have had smaller increases in credit spreads.
On the Economy

Journal Article
Credit risk in Japan's corporate bond market
Packer, Frank (1999-11)
From the fall of 1997 to the spring of 1999, yield spreads in Japan's corporate bond market increased sharply. An analysis of this rapid rise suggests that Japanese investors in corporate bonds may be paying closer attention to the credit risk of individual issuers. Such a shift in investor focus would represent a major change in the structure of this market.
Current Issues in Economics and Finance , Volume 5 , Issue Nov

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