## Figure 1.19. US and Emerging Market Corporate Bond Spread Decomposition and Leverage

## Source details

**Canonical URL:** [Figure 1.19. US and Emerging Market Corporate Bond Spread Decomposition and Leverage](https://www.imf.org/-/media/files/publications/gfsr/2017/october/chapter-1/pdf-data/figure1-19.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/gfsr/2017/october/chapter-1/pdf-data/figure1-19.pdf.md)
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### Key findings and observations
- Panel 1 — Quality Breakdown of the Investment-Grade Index:
  - Finding: "A high proportion of ratings are clustered at the bottom end of the investment-grade rating range."
  - Measure: "Percent of sample with BBB rating."
- Panel 2 — Emerging Market and US Dollar Bond Spreads per Turn of Leverage:
  - Finding: "Risk-adjusted spreads have compressed to postcrisis lows."
  - Measure: "Basis points per turn of leverage."
- Panel 3 — US Dollar Global Investment-Grade Bond (Excluding Emerging Markets) Yield Decomposition:
  - Observation: "Risk premiums grind tighter for investment ..."
  - Measure: "Percent"
  - Components shown: Market risk premiums, Term premium, Default risk compensation, Risk-neutral Treasury yield, Total.
- Panel 4 — US Dollar Developed Market High-Yield Bond Yield Decomposition:
  - Observation: "... and high-yield risk premiums fall to near new tights after an energy-related pop in 2016."
  - Measure: "Percent"
  - Components shown: Market risk premiums, Term premium, Default risk compensation, Risk-neutral Treasury yield, Total.
- Panel 5 — US Dollar Emerging Market Bond Yield Decomposition:
  - Observation: "Emerging market bond risk premiums are also grinding lower ..."
  - Measure: "Percent"
  - Note: "Panel 5 includes both investment-grade and high-yield bonds."
  - Components shown: Market risk premiums, Term premium, Default risk compensation, Risk-neutral Treasury yield, Total.
- Panel 6 — Markets Plus Term Premiums for Emerging Market and Developed Market Investment-Grade and High-Yield Bonds:
  - Observation: "... driven by declines in term and market risk premiums."
  - Measure: "Percent"
  - Groupings shown include: Global emerging markets, United States, Euro area, Global; and bond universes such as Developed market US dollar high yield, Global US dollar investment grade excluding emerging markets, Emerging markets, United States, Euro area, Global.

### Key statistics and axis labels (preserved exactly as in figure)
- Vertical scales visible across panels include:
  - "–2.0", "0", "2", "4", "6", "8", "10", "12", "14", "16", "18"
  - "–2", "0", "2", "4", "6", "8", "10", "12", "14", "16", "18", "20", "22"
  - "0", "20", "40", "60"
  - "–1", "0", "1", "2", "3", "4", "5", "6", "7", "8", "9", "10", "11", "12"
  - "0", "100", "200", "300", "400", "500", "600", "700", "800"
- Time axes and sample years (preserved exactly):
  - "Jan. 2007", "Aug. 07", "Mar. 08", "Oct. 08", "May 09", "Dec. 09", "Jul. 10", "Feb. 11", "Sep. 11", "Apr. 12", "Nov. 12", "Jun. 13", "Jan. 14", "Aug. 14", "Mar. 15", "Oct. 15", "May 16", "Dec. 16", "Jul. 17"
  - "Jan. 2002", "Jan. 03", "Jan. 04", "Jan. 05", "Jan. 06", "Jan. 07", "Jan. 08", "Jan. 09", "Jan. 10", "Jan. 11", "Jan. 12", "Jan. 13", "Jan. 14", "Jan. 15", "Jan. 16", "Jan. 17"
  - "1999", "2000", "2001", "03", "05", "07", "09", "11", "13", "15", "17"
  - "Jan. 2000", "Jan. 01", "Jan. 02", "Jan. 03", "Jan. 04", "Jan. 05", "Jan. 06", "Jan. 07", "Jan. 08", "Jan. 09", "Jan. 10", "Jan. 11", "Jan. 12", "Jan. 13", "Jan. 14", "Jan. 15", "Jan. 16", "Jan. 17"
  - "2008", "09", "10", "11", "12", "13", "14", "15", "16", "17" (as part of continuous index labels)
- Index and series labels preserved exactly:
  - "Market risk premiums"
  - "Term premium"
  - "Default risk compensation"
  - "Risk-neutral Treasury yield"
  - "Total"
  - "Global emerging markets"
  - "United States"
  - "Euro area"
  - "Global"
  - "Developed market US dollar high yield"
  - "Global US dollar investment grade, excluding emerging markets"
  - "Emerging markets"
  - "United StatesEuro areaGlobal" (as shown in the figure)

### Data construction and methodology notes (verbatim)
- "Sources: Bank of America Merrill Lynch; JPMorgan Chase & Co; Standard & Poor’s; and IMF staff calculations."
- Note (preserved exactly):
  - "Market risk premium is the difference between the observed monthly bond spread and the estimated default risk compensation. Default risk compensation is estimated monthly by breaking down each index’s holdings into Standard & Poor’s (S&P) ratings buckets. Then, based on each bucket’s rating and average duration, an average cumulative default probability is derived by referencing S&P’s ratings transition tables. These results are weighted by the duration and ratings distribution of the corresponding index. Investment-grade spread, duration, and weightings are derived from the JPMorgan JULI ALL ex-EM index. High-yield data are derived from the JPMorgan Developed Market High Yield index. Emerging market data are derived from the JPMorgan EMBI Global index. Loss given default is always assumed to remain constant at 60 percent. Panel 5 includes both investment-grade and high-yield bonds."

*Figure 1.19. US and Emerging Market Corporate Bond Spread Decomposition and Leverage (source: figure1-19).*

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_Source: https://www.imf.org/-/media/files/publications/gfsr/2017/october/chapter-1/pdf-data/figure1-19.pdf_