Macro factors in the term structure of credit spreads

Maurizio Luisi and Jeffery Amato
Additional contact information
Maurizio Luisi: ABN AMRO - ABN-Amro Bank, United Kingdom
Jeffery Amato: Goldman Sachs International

No 203, BIS Working Papers from Bank for International Settlements

Abstract: We estimate arbitrage-free term structure models of US Treasury yields and spreads on BBB and Brated corporate bonds in a doubly-stochastic intensity-based framework. A novel feature of our analysis is the inclusion of macroeconomic variables – indicators of real activity, inflation and financial conditions – as well as latent factors, as drivers of term structure dynamics. Our results point to three key roles played by macro factors in the term structure of spreads: they have a significant impact on the level, and particularly the slope, of the curves; they are largely responsible for variation in the prices of systematic risk; and speculative grade spreads exhibit greater sensitivity to macro shocks than high grade spreads.

Keywords: corporate bonds; default intensity; event risk; risk premia; interest rate rule (search for similar items in EconPapers)
JEL-codes: C13 C32 E44 E52 G12 G13 G14 (search for similar items in EconPapers)
Pages: 68 pages
Date: 2006-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

Downloads: (external link)
http://www.bis.org/publ/work203.pdf Full PDF document (application/pdf)
http://www.bis.org/publ/work203.htm (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:203

Access Statistics for this paper

More papers in BIS Working Papers from Bank for International Settlements Contact information at EDIRC.
Bibliographic data for series maintained by Martin Fessler ().