The Importance of Sovereign Bond Benchmarks for Corporate Debt Issuance
46 Pages Posted: 24 Feb 2019 Last revised: 9 Jun 2021
Date Written: October 7, 2020
We show that sovereign bond benchmarks are important determinants of corporate bond issuance and maturity. Sovereign bond issues that increase a country’s maximum maturity are followed by increases in the maximum maturity of corporate issues. We argue that by providing benchmark rates, long-maturity government issues complement the issuance of similar-maturity corporate issues. Sovereign and corporate bond issues can also be substitutes, but we find that this substitutability requires the availability of a high-quality sovereign bond benchmark. Our findings highlight the role that sovereign debt and its maturity play in capital market development.
Keywords: Corporate bond issuance, Sovereign bond issuance, Bond maturity, Sovereign benchmark, Reference rates, Gap Filling
JEL Classification: G12, G15, G18, G32, H63
Suggested Citation: Suggested Citation