Search Results
Discussion Paper
The Private Premium in Public Bonds?
In a 2012 New York Fed study, Chenyang Wei and I find that interest rate spreads on publicly traded bonds issued by companies with privately traded equity are about 31 basis points higher on average than spreads on bonds issued by companies with publicly traded equity, even after controlling for risk and other factors. These differences are economically and statistically significant and they persist in the secondary market. We control for many factors associated with bond pricing, including risk, liquidity, and covenants. Although these controls account for some of the absolute pricing ...
Speech
The Federal Reserve’s Corporate Credit Facilities: Why, How, and For Whom
Remarks at The U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness (delivered via videoconference).
Journal Article
A History of Large-Scale Asset Purchases before the Federal Reserve
The authors find that between 1870 and 1913, large open market purchases of Treasury securities made by the U.S. Treasury Department narrowed the yield spread between Treasury bonds with high interest rate risk (the risk of an investment?s value changing on account of interest rate changes) and those with low interest rate risk.
Discussion Paper
What Can We Learn from Prior Periods of Low Volatility?
Volatility, a measure of how much financial markets are fluctuating, has been near its record low in many asset classes. Over the last few decades, there have been only two other periods of similarly low volatility: in May 2013, and prior to the financial crisis in 2007. Is there anything we can learn from the recent period of low volatility versus what occurred slightly more than one year ago and seven years ago? Probably; the current volatility environment appears quite similar to the one in May 2013, but it?s substantially different from what happened prior to the financial crisis.
Working Paper
An Empirical Analysis of the Cost of Borrowing
We examine borrowing costs for firms using a security-level database with bank loans and corporate bonds issued by U.S. companies. We find significant within-firm dispersion in borrowing rates, even after controlling for security and firm observable characteristics. Obtaining a bank loan is 132 basis points cheaper than issuing a bond, after accounting for observable factors. Changes in borrowing costs have persistent negative impacts on firm-level outcomes, such as investment and borrowing, and these effects vary across sectors. These findings contribute to our understanding of borrowing ...
The Pandemic's Impact on Municipal Bonds
Higher state and local expenditures related to COVID-19, a delayed tax-filing deadline and a lack of liquidity roiled the muni bond market in the early months of the pandemic.
Working Paper
An Empirical Analysis of the Cost of Borrowing
We examine borrowing costs for firms using a security-level database with bank loans and corporate bonds issued by U.S. companies. We find significant within-firm dispersion in borrowing rates, even after controlling for security and firm observable characteristics. Obtaining a bank loan is 132 basis points cheaper than issuing a bond, after accounting for observable factors. Changes in borrowing costs have persistent negative impacts on firm-level outcomes, such as investment and borrowing, and these effects vary across sectors. These findings contribute to our understanding of borrowing ...
Newsletter
Why Do Bond Prices and Interest Rates Move in Opposite Directions?
Bonds. Just bonds. This November 2023 issue of Page One Economics helps learners navigate the world of purchasing, holding, and selling bonds. In addition to the basics, students will learn that the bond market, where existing bonds are bought and sold, creates a situation where bond prices and interest rates move in opposite directions.
Working Paper
Macroeconomic Drivers and the Pricing of Uncertainty, Inflation, and Bonds
This paper analyzes a new stylized fact: The correlation between uncertainty shocks and changes in inflation expectations has declined and turned negative over the past quarter century. It rationalizes this fact within a standard New Keynesian model with a lower bound on interest rates combined with a decline in the natural rate of interest. With a lower natural rate, the likelihood of the lower bound binding increased and the effects of uncertainty on the economy became more pronounced. In such an environment, increases in uncertainty raise the possibility that the central bank will be ...
Journal Article
The Fed’s Yield-Curve-Control Policy
The recent global financial crisis left governments in many advanced countries with very heavy debt burdens and their central banks with huge portfolios of government bonds. With many central banks today still facing policy rates that are uncomfortably close to zero, some may follow the example of Japan, which recently added a new long-term interest rate target to its short-term target to give itself ?yield-curve control.? The Federal Reserve?s foray into similar territory around the Second World War suggests that combining yield-curve control with quantitative easing when government ...