The Corporate Spread Curve and Industrial Production in the United States

By Jorge A Chan-Lau, Iryna V. Ivaschenko

January 1, 2002

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Jorge A Chan-Lau, and Iryna V. Ivaschenko The Corporate Spread Curve and Industrial Production in the United States, (USA: International Monetary Fund, 2002) accessed September 19, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The term structure of domestic investment grade bond spreads - or corporate spread curve - contains useful information to predict future changes in industrial production, beyond the information already contained in interest rates, commercial paper-treasury bill spreads, and lagged values of industrial production. In fact, the corporate spread curve can explain the cumulative growth rate of industrial production over 3- to 48-month horizons, and the marginal growth rate over 6- to 18-month horizons. Unlike other financial variables, the corporate spread curve has been a stable predictor of real activity for the last fifteen years.

Subject: Bonds, Corporate bonds, Financial institutions, Financial services, Industrial production, Production, Securities, Yield curve

Keywords: Aaa-rated bond, Agency bond, Bonds, Corporate bonds, Corporate spreads, Financial asset, Flight to quality, Forecasting, GMM estimation, Industrial production, Investment grade bonds, Number of lag, Numbers in parenthesis, Real activity, Securities, Structural break, Term structure, Treasury securities, Treasury yield curve, Treasury yield curve coefficients estimate, United States, WP, Yield curve

Publication Details

Pages:

44
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2002/008
Stock No:

WPIEA0082002
ISBN:

9781451842524
ISSN:

1018-5941

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