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Author: David Aboody Publisher: ISBN: Category : Languages : en Pages : 37
Book Description
We assess the impact of the recent financial crisis and government interventions to ameliorate the ensuing recession on corporate bond returns through the lens of bond market reactions to news conveyed by changes in aggregate earnings as a proxy for changes in expected future cash flows and changes in T-Bill rates as a proxy for changes in expected future discount rates. The association of T-Bill rate changes with bond returns is negative as expected prior to the financial crisis, but shifts to positive with the onset of the crisis partly explainable by government bailouts of large banks, and flight to safety for bonds issued by other institutions. The association of earnings changes with bond returns is positive as expected prior to the crisis, but, while remaining positive for investment grade, becomes insignificant for speculative grade bonds. The absence of an effect for investment grade bonds we attribute timely loss recognition in earnings by financial institutions subject to immediate loss recognition under mark-to-market accounting and profits during recovery as government relief took effect. The latter shift to insignificance we attribute to earnings changes reflecting diminished earnings persistence and delayed recognition of losses by non-financial institutions. Generally speaking, our results suggest that government intervention during the crisis period had significant effects on corporate bond markets. We also observe that earnings changes as a source of cash flow news is sensitive to the accounting policies that come to bear. More broadly, further results suggest that relations between bond returns and news conveyed by earnings and T-Bill rate changes are sensitive to the business cycle.
Author: David Aboody Publisher: ISBN: Category : Languages : en Pages : 37
Book Description
We assess the impact of the recent financial crisis and government interventions to ameliorate the ensuing recession on corporate bond returns through the lens of bond market reactions to news conveyed by changes in aggregate earnings as a proxy for changes in expected future cash flows and changes in T-Bill rates as a proxy for changes in expected future discount rates. The association of T-Bill rate changes with bond returns is negative as expected prior to the financial crisis, but shifts to positive with the onset of the crisis partly explainable by government bailouts of large banks, and flight to safety for bonds issued by other institutions. The association of earnings changes with bond returns is positive as expected prior to the crisis, but, while remaining positive for investment grade, becomes insignificant for speculative grade bonds. The absence of an effect for investment grade bonds we attribute timely loss recognition in earnings by financial institutions subject to immediate loss recognition under mark-to-market accounting and profits during recovery as government relief took effect. The latter shift to insignificance we attribute to earnings changes reflecting diminished earnings persistence and delayed recognition of losses by non-financial institutions. Generally speaking, our results suggest that government intervention during the crisis period had significant effects on corporate bond markets. We also observe that earnings changes as a source of cash flow news is sensitive to the accounting policies that come to bear. More broadly, further results suggest that relations between bond returns and news conveyed by earnings and T-Bill rate changes are sensitive to the business cycle.
Author: Michael Kreienbaum Publisher: GRIN Verlag ISBN: 3346489663 Category : Business & Economics Languages : en Pages : 41
Book Description
Bachelor Thesis from the year 2020 in the subject Economics - Finance, grade: 1,0, University of Mannheim, language: English, abstract: This paper aims to answer the question of whether post-crisis regulatory interventions caused a decline in liquidity. To serve this purpose, it investigates how individual provisions affect the market making business and how the corporate bond market changed in response to regulations. The paper approaches the issue by structuring theoretical and empirical evidence of corporate bond liquidity. It develops regulations impact levels from particular to aggregate, facilitating a perspicacious analysis. Important to note, the study attempts to assess neither welfare effects nor the desirability of regulations. After the financial crisis, regulators intervened to enhance the resilience of the banking system. Their provisions range from capital and liquidity standards to the prohibition of single activities considered too risky. However, concerns arise that post-crisis regulations harm liquidity by imposing constraints on its providers. When liquidity is low, investors that want to trade large volumes must wait for counterparties or accept to trade below market prices. Therefore, in certain financial markets like that for corporate bonds, intermediaries emerged to facilitate market functioning. They enable investors to trade immediately, reconciling imbalances in supply and demand. Illiquidity is costly for the economy as investors require compensation for holding riskier bonds. Amihud and Mendelson provide cross-sectional and time-series evidence of the resulting illiquidity discount. Hence, if regulations reduced liquidity, they would cause a depreciation of prices. Also, lower liquidity implies higher cost of debt and transaction costs, as well as a less efficient resource allocation. The regulatory impact on liquidity is, therefore, highly important for policymakers and investors.
Author: Publisher: ISBN: Category : Languages : en Pages :
Book Description
The financial crisis and the subsequent years of quantitative easing in the United States caused interest rates to drop sharply. In search of higher yields the high-yield corporate bond market was faced with high demand. This thesis aimed to analyze the behavior and risk adequacy of US high-yield bond yields during the time of quantitative easing after the financial crisis. The credit spread was the main variable used for this purpose. Furthermore, analyses were conducted to compare the credit spreads after the financial crisis with the ones before. In addition to high yield bonds, investment grade bonds were analyzed. The analyses showed that the credit spreads did not change significantly in the time period after the financial crisis between 2010 and 2014 during the time of quantitative easing. However, the study reveals that credit spreads in the high-yield as well as in the investment grade bond markets were significantly higher after the financial crisis (2010 - 2014) compared to before (2002 - 2006).
Author: Ms.Diana Ayala Pena Publisher: International Monetary Fund ISBN: 1513579754 Category : Business & Economics Languages : en Pages : 45
Book Description
This paper studies the determinants of shifts in debt composition among EM non-financial corporates. We show that institutions and macro fundamentals create an enabling environment for bond market development. During the recent boom episode, however, global cyclical factors accounted for most of the variation of bond shares in total corporate debt. The sensitivity to global factors appears to vary with relative bond market size—which we interpret to be associated with liquidity and easy entry and exit—rather than local fundamentals. Foreign bank linkages help explain why bond markets increasingly substituted for banks in channeling liquidity to EMs. Our results highlight the risk of capital flow reversal in EMs that benefited from the upturn in the global financial cycle mostly due to their liquid markets rather than strong fundamentals.
Author: F. Hagenstein Publisher: Springer ISBN: 0230523293 Category : Business & Economics Languages : en Pages : 355
Book Description
Investing in Corporate Bonds and Credit Risk is a valuable tool for any corporate bond investor. All the most recent developments and strategies in investment in corporate bonds are analyzed included with qualitative and quantitative approaches. A complete and up-to-date investment process is developed through the book, using many examples taken from banking practice. The growing significance of derivative instruments and credit diversification to bond investors is also analyzed in detail.
Author: Financial Crisis Inquiry Commission Publisher: Cosimo, Inc. ISBN: 1616405414 Category : Political Science Languages : en Pages : 692
Book Description
The Financial Crisis Inquiry Report, published by the U.S. Government and the Financial Crisis Inquiry Commission in early 2011, is the official government report on the United States financial collapse and the review of major financial institutions that bankrupted and failed, or would have without help from the government. The commission and the report were implemented after Congress passed an act in 2009 to review and prevent fraudulent activity. The report details, among other things, the periods before, during, and after the crisis, what led up to it, and analyses of subprime mortgage lending, credit expansion and banking policies, the collapse of companies like Fannie Mae and Freddie Mac, and the federal bailouts of Lehman and AIG. It also discusses the aftermath of the fallout and our current state. This report should be of interest to anyone concerned about the financial situation in the U.S. and around the world.THE FINANCIAL CRISIS INQUIRY COMMISSION is an independent, bi-partisan, government-appointed panel of 10 people that was created to "examine the causes, domestic and global, of the current financial and economic crisis in the United States." It was established as part of the Fraud Enforcement and Recovery Act of 2009. The commission consisted of private citizens with expertise in economics and finance, banking, housing, market regulation, and consumer protection. They examined and reported on "the collapse of major financial institutions that failed or would have failed if not for exceptional assistance from the government."News Dissector DANNY SCHECHTER is a journalist, blogger and filmmaker. He has been reporting on economic crises since the 1980's when he was with ABC News. His film In Debt We Trust warned of the economic meltdown in 2006. He has since written three books on the subject including Plunder: Investigating Our Economic Calamity (Cosimo Books, 2008), and The Crime Of Our Time: Why Wall Street Is Not Too Big to Jail (Disinfo Books, 2011), a companion to his latest film Plunder The Crime Of Our Time. He can be reached online at www.newsdissector.com.
Author: OECD Publisher: OECD Publishing ISBN: 9264621598 Category : Languages : en Pages : 66
Book Description
This report provides an assessment of the Swedish corporate bond market and policy recommendations to improve its functioning, drawing from detailed empirical analysis and in-depth interviews with market participants.
Author: Bo Becker Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
Corporate bond markets proved remarkably resilient against a sharp contraction caused by the 2020 Covid-19 pandemic. We document three important findings: (1) bond issuance increased immediately when the contraction hit, whereas, in contrast, syndicated loan issuance was low; (2) Federal Reserve interventions increased bond issuance, while loan issuance also increased, but to a lesser degree; and (3) bond issuance was concentrated in the investment-grade segment for large and profitable issuers. We compare these results to previous crises and recessions and document similar patterns. We conclude that the U.S. bond market is an important and resilient source of funding for corporations.
Author: Arne Wilkes Publisher: Peter Lang Gmbh, Internationaler Verlag Der Wissenschaften ISBN: 9783631606049 Category : Bond market Languages : en Pages : 0
Book Description
Credit spreads express how markets evaluate the riskiness of corporate bonds compared to risk-free investments. Since credit spreads have been highly volatile especially during the last decade it is important for academics and practitioners alike to understand the dynamic interdependencies between credit spreads and their determinants. Based on a sample of European corporate bonds and different macroeconomic variables the author analyzes the determinants of credit spreads during the period of 1999 to 2009. With a macro-finance term structure model he shows that the European corporate bond market is largely integrated with some remaining segmentation. Furthermore, panel regressions yield that declining liquidity leads to a significant widening of credit spreads especially during the recent financial crisis. Finally, he demonstrates based on a cointegration analysis that a long-term relationship exists between credit spreads and their determinants and that credit spreads were significantly overpriced after the collapse of Lehman Brothers but have almost returned to equilibrium towards the end of 2009.
Author: Massimo Guidolin Publisher: Springer ISBN: 1137561394 Category : Business & Economics Languages : en Pages : 215
Book Description
Researchers, policymakers and commentators have long debated the patterns through which adverse shocks in a few markets may quickly spread to a range of apparently disconnected financial markets causing widespread losses and turmoil. This book uses modern linear and non-linear econometric methods to characterize how shocks to the yield of risky fixed income securities, such as sub-prime asset-backed or low-credit rating sovereign bonds, are transmitted to the yields in other markets. These include equity and corporate bond markets as well as relatively risk-free fixed income securities, such as highly rated asset-backed securities and sovereign bonds from core Eurozone countries. The authors analyse and compare the results from linear and non-linear models to identify and assess four distinct contagion channels characterizing both US and European financial markets. These include the correlated information, risk premium, flight-to-liquidity, and flight-to quality channels. The results of this study support the theory that both investors and policy-makers ought to pay special attention to liquidity and commonalities in the perceptions of the probabilities of default, as channels through which financial shocks propagate.
Author: David Aboody
Author: David Aboody
Author: Michael Kreienbaum
Author: 
Author: Ms.Diana Ayala Pena
Author: F. Hagenstein
Author: Financial Crisis Inquiry Commission
Author: OECD
Author: Bo Becker
Author: Arne Wilkes
Author: Massimo Guidolin