The Term Structure of the Excess Bond Premium: Measures and Implications

In this article, we construct daily aggregate as well as short-, medium-, and long-term "excess bond premium" (EBP) measures using a widely available corporate bond database (known as "TRACE"). The novel EBP measures we construct provide an important gauge of strains in the financial sector at different horizons. We find that the short-term EBP measure increased more dramatically at the peaks of the COVID-19 pandemic and the 2007-09 global financial crisis, but the pattern was reversed around the interest rate liftoff at the end of 2015.

Keywords: term structure, TRACE, COVID-19, excess bond premium

JEL Classification: E44; E58; G12

Suggested Citation: Suggested Citation

Gilchrist, Simon and Wei, Bin and Yue, Vivian Z. and Zakrajšek, Egon, The Term Structure of the Excess Bond Premium: Measures and Implications (September 01, 2021). FRB Atlanta Policy Hub Paper No. 2021-12, https://doi.org/10.29338/ph2021-12, Available at SSRN: https://ssrn.com/abstract=5181942 or http://dx.doi.org/10.2139/ssrn.5181942