The Market for Borrowing Corporate Bonds

60 Pages Posted: 24 Aug 2010

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: August 2010

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 per year. Factors that increase borrowing costs are loan size, percentage of inventory lent, rating, and borrower identity. Trading strategies based on cost or amount of borrowing do not yield excess returns. Bonds with corresponding CDS contracts are more actively lent than those without. Finally, the 2007 Credit Crunch did not affect average borrowing cost or loan volume, but increased borrowing cost variance.

Suggested Citation

Asquith, Paul and Au, Andrea S. and Covert, Thomas and Pathak, Parag A., The Market for Borrowing Corporate Bonds (August 2010). NBER Working Paper No. w16282. Available at SSRN: https://ssrn.com/abstract=1662276

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
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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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