The Market for Borrowing Corporate Bonds

62 Pages Posted: 28 Jun 2010 Last revised: 25 Oct 2011

See all articles by Paul Asquith

Paul Asquith

Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA); National Bureau of Economic Research (NBER)

Andrea S. Au

State Street Corporation

Thomas Covert

University of Chicago - Booth School of Business

Parag A. Pathak

Massachusetts Institute of Technology (MIT) - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: October 20, 2011

Abstract

This paper describes the market for borrowing corporate bonds using a comprehensive dataset from a major lender. The cost of borrowing corporate bonds is comparable to the cost of borrowing stock, between 10 and 20 basis points, and both have fallen over time. Factors that influence borrowing costs are loan size, percentage of inventory lent, rating, and borrower identity. There is no evidence that bond short sellers have private information. Bonds with CDS contracts are more actively lent than those without. Finally, the 2007 Credit Crunch does not affect average borrowing costs or loan volume, but does increase borrowing cost variance.

Keywords: Short Sales, Corporate Bonds, CDs

JEL Classification: G12, G14

Suggested Citation

Asquith, Paul and Au, Andrea S. and Covert, Thomas and Pathak, Parag A., The Market for Borrowing Corporate Bonds (October 20, 2011). Available at SSRN: https://ssrn.com/abstract=1631260 or http://dx.doi.org/10.2139/ssrn.1631260

Paul Asquith (Contact Author)

Massachusetts Institute of Technology (MIT) - Economics, Finance, Accounting (EFA) ( email )

77 Massachusetts Avenue
Cambridge, MA 02139-4307
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Andrea S. Au

State Street Corporation ( email )

State Street Financial Center
1 Lincoln Street
Boston, MA 02111
United States

Thomas Covert

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Parag A. Pathak

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
E52-391
Cambridge, MA 02142
United States

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