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Discussion Paper
What Is Corporate Bond Market Distress?
Corporate bonds are a key source of funding for U.S. non-financial corporations and a key investment security for insurance companies, pension funds, and mutual funds. Distress in the corporate bond market can thus both impair access to credit for corporate borrowers and reduce investment opportunities for key financial sub-sectors. In a February 2021 Liberty Street Economics post, we introduced a unified measure of corporate bond market distress, the Corporate Bond Market Distress Index (CMDI), then followed up in early June 2022 with a look at how corporate bond market functioning evolved ...
Discussion Paper
How Is the Corporate Bond Market Functioning as Interest Rates Increase?
The Federal Open Market Committee (FOMC) has increased the target interest rate by 3.75 percentage points since March 17, 2022. In this post we examine how corporate bond market functioning has evolved along with the changes in monetary policy through the lens of the U.S. Corporate Bond Market Distress Index (CMDI). We compare this evolution to the 2015 tightening cycle for context on how bond market conditions have evolved as rates increase. The overall CMDI has deteriorated but remains close to historical medians. The investment-grade CMDI index has deteriorated more than the high-yield, ...