Monetary Policy and Corporate Bond Returns

A Kontonikas, P Maio and Zivile Zekaite

Essex Finance Centre Working Papers from University of Essex, Essex Business School

Abstract: We investigate the impact of monetary policy shocks (the surprise change in the Fed Funds rate (FFR)) on excess corporate bonds returns. We obtain a significant negative response of bond returns to FFR shocks. This effect is especially strong in the period before the 2007- 09 financial crisis and for bonds with longer maturity and lower rating. We show that the largest portion of this response is related to higher expected excess bond returns, especially term premia news. Therefore, the discount-rate channel represents an important mechanism through which monetary policy affects corporate bonds. However, the financial crisis has attenuated this effect.

Keywords: Corporate Bond Market; Variance Decomposition; Monetary Policy (search for similar items in EconPapers)
Date: 2017-10
New Economics Papers: this item is included in nep-mon
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://repository.essex.ac.uk/20571/ original version (application/pdf)

Related works:
Working Paper: Monetary Policy and Corporate Bond Returns (2016)
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:esy:uefcwp:20571

Access Statistics for this paper

More papers in Essex Finance Centre Working Papers from University of Essex, Essex Business School Contact information at EDIRC.
Bibliographic data for series maintained by Nikolaos Vlastakis ().