Click to login and read the full article.
Don’t have access? Click here to request a demo
Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
UK: 0207 139 1600
Abstract
Recent reports in the financial press regarding negative spreads in the investment-grade corporate bond market have drawn the attention of policy makers and market participants alike. Using a sample of investment-grade corporate bond yields for the period 9/2009 to 9/2010, the authors examine all data points where the trade price reflects a negative spread. There are a total of 67 instances distributed among 10 companies where the credit spread is negative based on reported trade prices. The observed credit spread does not violate arbitrage restrictions once the bid–ask spread and liquidity are accounted for. In terms of default risk, CDS prices are higher than the bond yield spread on these days, but funding and asset-specific liquidity constraints possibly limit the ability to exploit the arbitrage.
- © 2011 Pageant Media Ltd
Don’t have access? Click here to request a demo
Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
UK: 0207 139 1600
Log in using your username and password
In this issue
