The Slope of the Credit Yield Curve for Speculative-Grade Issuers

Posted: 1 Mar 1998

See all articles by Jean Helwege

Jean Helwege

UC Riverside

Christopher M. Turner

Black Rock Financial Management, Inc.

Date Written: November 1997


Many theoretical bond pricing models predict that the credit yield curve facing risky bond issuers is downward-sloping. Previous empirical research (Sarig and Warga (1989) and Fons (1994)) supports these models. Our study examines sets of bonds issued by the same firm with equal priority in the liability structure, but with different maturities, thus holding credit quality constant. We find, counter to prior research, that risky bonds typically have upward-sloping credit yield curves. Moreover, when we combine our matched sets of bonds (no longer controlling credit quality), the estimated slope is negative, indicating a sample selection bias problem associated with maturity.

JEL Classification: G12, G13

Suggested Citation

Helwege, Jean and Turner, Christopher M., The Slope of the Credit Yield Curve for Speculative-Grade Issuers (November 1997). Available at SSRN:

Jean Helwege

UC Riverside ( email )

900 University Ave.
Anderson Hall
Riverside, CA 92521
United States
9518274284 (Phone)

Christopher M. Turner (Contact Author)

Black Rock Financial Management, Inc. ( email )

345 Park Avenue
New York, NY 10154

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