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Credit Spreads on Corporate Bonds and the Macroeconomy in Japan

Kiyotaka Nakashima () and Makoto Saito ()

Global COE Hi-Stat Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: Using secondary market data on corporate bonds issued in Japan between 1997 and 2005, this paper explores the determinants of the credit spread of corporate bond rates over interest swap rates. We find that credit spreads properly reflect financial factors at the firm level, including debt-to-equity ratios, volatility, and maturity, particularly for longer-term bonds. In addition, an economy-wide factor common among bond issues unable to be captured by firm-level factors, plays an important role in determining credit spreads, and these economy-wide effects to a great extent cancel out firm-level factors for some subsample periods. We also identify possible factors responsible for the significant economy-wide effects.

Keywords: credit spreads; corporate bonds; market liquidity (search for similar items in EconPapers)
JEL-codes: G12 G13 (search for similar items in EconPapers)
Date: 2009-05
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Related works:
Journal Article: Credit spreads on corporate bonds and the macroeconomy in Japan (2009) Downloads
Working Paper: Credit Spreads on Corporate Bonds and the Macroeconomy in Japan (2009) Downloads
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