Corporate Loan Spreads and Economic Activity

52 Pages Posted: 9 Jan 2021 Last revised: 12 Oct 2021

See all articles by Anthony Saunders

Anthony Saunders

New York University - Leonard N. Stern School of Business

Alessandro Spina

Copenhagen Business School

Sascha Steffen

Frankfurt School of Finance & Management

Daniel Streitz

Copenhagen Business School

Date Written: October 11, 2021

Abstract

We use secondary corporate loan-market prices to construct a novel loan-market-based credit spread. This measure has considerable predictive power for economic activity across macroeconomic outcomes in both the U.S. and Europe and captures unique information not contained in public market credit spreads. Loan-market borrowers are compositionally different and particularly sensitive to supply-side frictions as well as financial frictions that emanate from their own balance sheets. This evidence highlights the joint role of financial intermediary and borrower balance-sheet frictions in understanding macroeconomic developments and enriches our understanding of which type of financial frictions matter for the economy

Keywords: Credit spreads, Secondary loan market, Bonds, Credit supply, Business cycle

JEL Classification: E23, E44, G20

Suggested Citation

Saunders, Anthony and Spina, Alessandro and Steffen, Sascha and Streitz, Daniel, Corporate Loan Spreads and Economic Activity (October 11, 2021). NYU Stern School of Business Forthcoming, Available at SSRN: https://ssrn.com/abstract=3717358 or http://dx.doi.org/10.2139/ssrn.3717358

Anthony Saunders

New York University - Leonard N. Stern School of Business ( email )

44 West 4th Street
9-190, MEC
New York, NY 10012-1126
United States
212-998-0711 (Phone)
212-995-4220 (Fax)

Alessandro Spina

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

Sascha Steffen (Contact Author)

Frankfurt School of Finance & Management ( email )

Adickesallee
32-34
Frankfurt, 60322
Germany
16097326929 (Phone)

HOME PAGE: http://www.sascha-steffen.de

Daniel Streitz

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

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