Impact of the COVID-19 Pandemic on the U.S. Corporate Bond Market

48 Pages Posted: 19 Sep 2022 Last revised: 13 Feb 2023

See all articles by Rainer Jankowitsch

Rainer Jankowitsch

WU (Vienna University of Economics and Business); Vienna Graduate School of Finance (VGSF)

Florian Pauer

Vienna University of Economics and Business - Department of Finance, Accounting & Statistics

Elizabeth Rinde

Vienna Graduate School of Finance (VGSF)

Date Written: February 6, 2023

Abstract

We analyze the price and liquidity effects in the U.S. corporate bond market caused by the Covid-19 crisis. We carefully consider the different impact of social distancing measures on firms. We find significant effects, i.e., bonds of firms that are more affected by these measures show a much stronger increase in yield spreads by 40.9 bp. Controlling for these effects, we employ standard credit and liquidity risk factors to explain yield spread changes. In addition, we explicitly consider the rollover risk channel. Although, we find a highly significant impact of liquidity measures as discussed in the previous literature, our results show that for firms highly affected by social distancing measures credit risk is the dominant factor.

Keywords: corporate bonds, Covid-19, social distancing, rollover risk

JEL Classification: G01, G12

Suggested Citation

Jankowitsch, Rainer and Pauer, Florian and Rinde, Elizabeth, Impact of the COVID-19 Pandemic on the U.S. Corporate Bond Market (February 6, 2023). Available at SSRN: https://ssrn.com/abstract=4221095 or http://dx.doi.org/10.2139/ssrn.4221095

Rainer Jankowitsch

WU (Vienna University of Economics and Business) ( email )

Welthandelsplatz 1
Vienna, Vienna AT1020
Austria
+43 1 31 336 4340 (Phone)
+43 1 310 0580 (Fax)

Vienna Graduate School of Finance (VGSF) ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

Florian Pauer

Vienna University of Economics and Business - Department of Finance, Accounting & Statistics ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

Elizabeth Rinde (Contact Author)

Vienna Graduate School of Finance (VGSF) ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

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