Corporate Bond Risk and Real Activity: An Empirical Analysis of Yield Spreads and Their Systematic Components
IMF Working Papers, October 1, 2001
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- Corporate Bond Risk and Real Activity: An Empirical Analysis of Yield Spreads and Their Systematic Components
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Bibliographic details
- Authors: Iryna V. Ivaschenko, Jorge A Chan-Lau
- Published: October 1, 2001
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451857580.001
Key findings
- The yield spread of investment-grade bonds relative to Treasuries, used as a proxy of default risk, predicts marginal changes in industrial production in the United States up to 12 months in the future.
- The predictive relationship holds even upon controlling for a commonly used predictor: the commercial paper spread.
- Systematic risk factors associated with the yield spread of investment-grade bonds to a variety of risk-free benchmarks—Treasuries, agency bonds, and AAA-rated bonds—have significant predictive content for the future growth rate of industrial production at 3 to 18 months forecasting horizon, both in-sample and out-of-sample.
- A regime-switching estimation shows that the systematic risk component is able to capture the "industrial production business cycle" well.
Data, scope, and subject coverage
- Geographic focus: United States
- Subject tags: Bonds, Corporate bonds, Financial institutions, Financial services, Industrial production, Production, Securities, Yield curve
- Keywords explicitly used in the paper: AAA-rated bond; Bonds; business cycle; coefficients estimate; commercial paper; Corporate bonds; corporate spreads; forecasting; GMM estimation; growth rate; Industrial production; Investment grade bonds; Markov process; maturity bond index; number of lag; numbers in parenthesis; principal components analysis; regime-switching; Securities; systematic risk; United States; WP; Yield curve
Publication and metadata
- Authors: Iryna V. Ivaschenko, Jorge A Chan-Lau
- Publication date: October 1, 2001
- Series: Working Paper No. 2001/158
- Issue: 158
- Volume: 2001
- Pages: 62
- Stock No: WPIEA1582001
- DOI: https://doi.org/10.5089/9781451857580.001
- ISBN: 9781451857580
- ISSN: 1018-5941
IMF Working Paper: "Corporate Bond Risk and Real Activity: An Empirical Analysis of Yield Spreads and Their Systematic Components", Iryna V. Ivaschenko and Jorge A Chan-Lau, October 1, 2001.