Determinants of Spreads on New High-Yield Bonds

Martin S. Fridson and Christopher M. Garman

Financial Analysts Journal, 1998, vol. 54, issue 2, 28-39

Abstract: Non-investment-grade debt offerings have a reputation as “story bonds” for which objective valuation criteria are difficult to establish. Nevertheless, 56 percent of the variance in risk premiums is explained by quantifiable factors, such as rating, term, and secondary-market spreads. At the same time, the underwriter's effectiveness in presenting the issuer to investors appears to materially influence pricing.

Date: 1998
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DOI: 10.2469/faj.v54.n2.2163

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