Measuring the Forest through the Trees: The Corporate Bond Market Distress Index

Nina Boyarchenko, Richard Crump, Anna Kovner and Or Shachar

No 20210222, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: With more than $10.4 trillion outstanding as of Q3:2020, the U.S. corporate bond market is a significant source of funding for most large U.S. corporations. While prior literature offers a variety of measures to capture different aspects of corporate bond market functioning, there is little consensus on how to use those measures to identify periods of distress in the market as a whole. In this post, we describe the U.S. Corporate Bond Market Distress Index (CMDI), which offers a single measure to quantify joint dislocations in the primary and secondary corporate bond markets. As detailed in a new working paper, the index provides more salient information about the state of the corporate bond market relative to common measures of financial stress, thereby more accurately identifying periods of widespread dislocation in the market.

Keywords: corporate market distress; corporate bond liquidity; corporate bond spreads (search for similar items in EconPapers)
JEL-codes: G1 G2 (search for similar items in EconPapers)
Date: 2021-02-22
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