Corporate Yields: Effect of Credit Ratings and Sovereign Yields

Julia Bevilaqua, Galina Hale and Eric Tallman

AEA Papers and Proceedings, 2020, vol. 110, 499-503

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.

JEL-codes: D22 G12 G24 G32 (search for similar items in EconPapers)
Date: 2020
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Working Paper: Corporate Yields: Effect of Credit Ratings and Sovereign Yields (2020)
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DOI: 10.1257/pandp.20201008

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