Measuring Corporate Bond Market Dislocations

69 Pages Posted: 20 Jan 2021 Last revised: 4 Jan 2023

See all articles by Nina Boyarchenko

Nina Boyarchenko

Federal Reserve Bank of New York

Richard K. Crump

Federal Reserve Banks - Federal Reserve Bank of New York

Anna Kovner

Federal Reserve Bank of New York

Or Shachar

Federal Reserve Bank of New York

Date Written: January 1, 2021

Abstract

We link bond market functioning to future economic activity through a new measure, the Corporate Bond Market Distress Index (CMDI). The CMDI coalesces metrics from primary and secondary markets in real time, offering a unified measure to capture access to capital markets credit. The index correctly identifies periods of distress and predicts future realizations of commonly used measures of market functioning, while the converse is not the case. We show that disruptions in access to corporate bond markets have an economically material, statistically significant impact on the real economy, even after controlling for standard predictors including credit spreads, which emphasizes the need to evaluate credit market conditions from a broader perspective than secondary market spreads.

Keywords: corporate bond market conditions, corporate bond spreads, corporate bond issuance, corporate bond liquidity

JEL Classification: G12, G19, C43, E37

Suggested Citation

Boyarchenko, Nina and Crump, Richard K. and Kovner, Anna and Shachar, Or, Measuring Corporate Bond Market Dislocations (January 1, 2021). FRB of New York Staff Report No. 957, Rev. December 2022, Available at SSRN: https://ssrn.com/abstract=3767021 or http://dx.doi.org/10.2139/ssrn.3767021

Nina Boyarchenko

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-7339 (Phone)
212-720-1582 (Fax)

Richard K. Crump (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Anna Kovner

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Or Shachar

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
(212) 720-6974 (Phone)
(212) 720-1582 (Fax)

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