Corporate Yields: Effect of Credit Ratings and Sovereign Yields

8 Pages Posted: 29 Jan 2020

See all articles by Julia Bevilaqua

Julia Bevilaqua

University of California, Santa Cruz

Galina Hale

Federal Reserve Bank of San Francisco

Eric Tallman

Federal Reserve Banks - Federal Reserve Bank of San Francisco

Date Written: January 2020

Abstract

We empirically evaluate the importance of two sources of public information affecting pricing of global corporate bonds: bond ratings provided by rating agencies and sovereign yields of the issuer's country. We find that both in the cross-section of firms and over time more variation in corporate bond yields is explained by sovereign yields than by corporate bond ratings. When sovereign yields are high, their importance in pricing corporate bonds declines. In these states, for advanced economies' borrowers, the importance of corporate ratings increases. There is a small upward trend in the importance of corporate ratings over time.

Keywords: bond, Rating, Sovereign

JEL Classification: E52, F34, F36, F65

Suggested Citation

Bevilaqua, Julia and Hale, Galina and Tallman, Eric, Corporate Yields: Effect of Credit Ratings and Sovereign Yields (January 2020). CEPR Discussion Paper No. DP14345, Available at SSRN: https://ssrn.com/abstract=3526071

Julia Bevilaqua (Contact Author)

University of California, Santa Cruz ( email )

1156 High St
Santa Cruz, CA 95064
United States

Galina Hale

Federal Reserve Bank of San Francisco ( email )

101 Market Street
San Francisco, CA 94105
United States
415-974-3131 (Phone)
415-974-2168 (Fax)

HOME PAGE: http://www.frbsf.org/economic-research/economists/galina-hale/

Eric Tallman

Federal Reserve Banks - Federal Reserve Bank of San Francisco ( email )

101 Market Street
San Francisco, CA 94105
United States

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