Measuring Corporate Bond Market Dislocations

69 Pages Posted: 20 Jan 2021

See all articles by Nina Boyarchenko

Nina Boyarchenko

Federal Reserve Bank of New York

Richard K. Crump

Federal Reserve Banks - Federal Reserve Bank of New York

Anna Kovner

Federal Reserve Bank of New York

Or Shachar

Federal Reserve Bank of New York

Date Written: January 2021

Abstract

We measure dislocations in the market for corporate bonds in real time with the Corporate Bond Market Distress Index (CMDI), allowing for the aggregation of a broad set of measures of market functioning from primary and secondary bond markets into a single measure. The index quantifies dislocations from a preponderance-of-metrics perspective, ensuring that the measure of market distress is not driven by any one statistic. We document that the index correctly identifies periods of dislocations, is robust to alternative choices of the aggregation procedure, and provides differential predictive information for future real outcomes relative to common spread measures.

Keywords: corporate bond market conditions, corporate bond spreads, corporate bond issuance, corporate bond liquidity

JEL Classification: G12, G19, C43, E37

Suggested Citation

Boyarchenko, Nina and Crump, Richard K. and Kovner, Anna and Shachar, Or, Measuring Corporate Bond Market Dislocations (January 2021). FRB of New York Staff Report No. 957, Available at SSRN: https://ssrn.com/abstract=3767021 or http://dx.doi.org/10.2139/ssrn.3767021

Nina Boyarchenko

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-7339 (Phone)
212-720-1582 (Fax)

Richard K. Crump (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Anna Kovner

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Or Shachar

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
(212) 720-6974 (Phone)
(212) 720-1582 (Fax)

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