How Is the Corporate Bond Market Responding to Financial Market Volatility?

Nina Boyarchenko, Richard Crump, Anna Kovner and Or Shachar

No 20220601, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: The Russian invasion of Ukraine increased uncertainty around the world. Although most U.S. companies have limited direct exposure to Ukrainian and Russian trading partners, increased global uncertainty may still have an indirect effect on funding conditions through tightening financial conditions. In this post, we examine how conditions in the U.S. corporate bond market have evolved since the start of the year through the lens of the U.S. Corporate Bond Market Distress Index (CMDI). As described in a previous Liberty Street Economics post, the index quantifies joint dislocations in the primary and secondary corporate bond markets and can thus serve as an early warning signal to detect financial market dysfunction. The index has risen sharply from historically low levels before the invasion of Ukraine, peaking on March 19, but appears to have stabilized around the median historical level.

Keywords: corporate bond market conditions; invasion of Ukraine (search for similar items in EconPapers)
JEL-codes: E5 G12 (search for similar items in EconPapers)
Date: 2022-06-01
New Economics Papers: this item is included in nep-cis, nep-fmk and nep-mac
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