Complementarity of Sovereign and Corporate Debt Issuance: Mind the Gap

40 Pages Posted: 24 Feb 2019 Last revised: 23 May 2022

See all articles by Bruce D. Grundy

Bruce D. Grundy

RSFAS Australian National University

Sjoerd van Bekkum

Erasmus University

Patrick Verwijmeren

Erasmus University Rotterdam (EUR)

Date Written: November 22, 2021

Abstract

We investigate the relation between sovereign and corporate bond issuance. Sovereign bond issues that increase a country’s maximum maturity are followed by increases in the maximum maturity of corporate issues. Our results point to issuance complementarities based on the benchmarking of corporate bonds to sovereign bonds. Sovereign and corporate bond issues are also substitutes, but substitutability requires the availability of a high-quality sovereign bond benchmark. By adding to existing theories focusing on substitutability, our findings highlight the role that the maturity of sovereign debt plays 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

Grundy, Bruce D. and van Bekkum, Sjoerd and Verwijmeren, Patrick, Complementarity of Sovereign and Corporate Debt Issuance: Mind the Gap (November 22, 2021). Available at SSRN: https://ssrn.com/abstract=3330391 or http://dx.doi.org/10.2139/ssrn.3330391

Bruce D. Grundy

RSFAS Australian National University ( email )

Kingsley Street
Acton ACT
Australia
0431247108 (Phone)

Sjoerd Van Bekkum

Erasmus University ( email )

P.O. Box 1738
Rotterdam, NL 3062 PA
Netherlands

Patrick Verwijmeren (Contact Author)

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

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