Monetary policy and corporate bond returns

Haifeng Guo; Alexandros Kontonikas; Paulo Fraga Martins Maio

doi:10.1093/rapstu/raaa005

Monetary policy and corporate bond returns

Haifeng Guo, Alexandros Kontonikas^*, Paulo Fraga Martins Maio

^*Corresponding author for this work

Finance, Helsinki

Research output: Contribution to journal › Article › Scientific › peer-review

14 Citations (Scopus)

Abstract

We investigate the impact of monetary policy shocks on excess corporate bonds returns. We obtain a significant negative response of bond returns to policy shocks, which is especially strong among low-grading bonds. The largest portion of this response is related to higher expected bond returns (risk premium news), while the impact on expectations of future interest rates (interest rate news) plays a secondary role. However, the interest rate channel is dominant among high-grading bonds and Treasury bonds. Looking at the two components of bond premium news, we find that the dominant channel for high-rating (low-rating) bonds is term premium (credit premium) news.

Original language	English
Peer-reviewed scientific journal	Review of Asset Pricing Studies
Volume	10
Issue number	3
Pages (from-to)	441-489
Number of pages	49
ISSN	2045-9920
DOIs	https://doi.org/10.1093/rapstu/raaa005
Publication status	Published - 07.07.2020
MoE publication type	A1 Journal article - refereed

Keywords

512 Business and Management

Access to Document

10.1093/rapstu/raaa005

SSRN_id3547931-1Accepted author manuscript, 0.98 MBLicence: CC BY-NC

https://ssrn.com/abstract=3547931

OpenUrl availability

Full text

Cite this

@article{9b96f63e362948f0941e45b0da2ad6e6,

title = "Monetary policy and corporate bond returns",

abstract = "We investigate the impact of monetary policy shocks on excess corporate bonds returns. We obtain a significant negative response of bond returns to policy shocks, which is especially strong among low-grading bonds. The largest portion of this response is related to higher expected bond returns (risk premium news), while the impact on expectations of future interest rates (interest rate news) plays a secondary role. However, the interest rate channel is dominant among high-grading bonds and Treasury bonds. Looking at the two components of bond premium news, we find that the dominant channel for high-rating (low-rating) bonds is term premium (credit premium) news. ",

keywords = "512 Business and Management",

author = "Haifeng Guo and Alexandros Kontonikas and {Fraga Martins Maio}, Paulo",

year = "2020",

month = jul,

day = "7",

doi = "10.1093/rapstu/raaa005",

language = "English",

volume = "10",

pages = "441--489",

journal = "Review of Asset Pricing Studies",

issn = "2045-9920",

publisher = "Oxford University Press",

number = "3",

}

TY - JOUR

T1 - Monetary policy and corporate bond returns

AU - Guo, Haifeng

AU - Kontonikas, Alexandros

AU - Fraga Martins Maio, Paulo

PY - 2020/7/7

Y1 - 2020/7/7

N2 - We investigate the impact of monetary policy shocks on excess corporate bonds returns. We obtain a significant negative response of bond returns to policy shocks, which is especially strong among low-grading bonds. The largest portion of this response is related to higher expected bond returns (risk premium news), while the impact on expectations of future interest rates (interest rate news) plays a secondary role. However, the interest rate channel is dominant among high-grading bonds and Treasury bonds. Looking at the two components of bond premium news, we find that the dominant channel for high-rating (low-rating) bonds is term premium (credit premium) news.

AB - We investigate the impact of monetary policy shocks on excess corporate bonds returns. We obtain a significant negative response of bond returns to policy shocks, which is especially strong among low-grading bonds. The largest portion of this response is related to higher expected bond returns (risk premium news), while the impact on expectations of future interest rates (interest rate news) plays a secondary role. However, the interest rate channel is dominant among high-grading bonds and Treasury bonds. Looking at the two components of bond premium news, we find that the dominant channel for high-rating (low-rating) bonds is term premium (credit premium) news.

KW - 512 Business and Management

UR - http://www.scopus.com/inward/record.url?scp=85093661018&partnerID=8YFLogxK

U2 - 10.1093/rapstu/raaa005

DO - 10.1093/rapstu/raaa005

M3 - Article

SN - 2045-9920

VL - 10

SP - 441

EP - 489

JO - Review of Asset Pricing Studies

JF - Review of Asset Pricing Studies

IS - 3

ER -

Monetary policy and corporate bond returns

Abstract

Keywords

Access to Document

OpenUrl availability

Other files and links

Fingerprint

Cite this