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The market for borrowing corporate bonds

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Author Info

  • Asquith, Paul
  • Au, Andrea S.
  • Covert, Thomas
  • Pathak, Parag A.

Abstract

This paper describes the market for borrowing corporate bonds using a comprehensive data set from a major lender. The cost of borrowing corporate bonds is comparable to the cost of borrowing stock, between 10 and 20 basis points, and both have fallen over time. Factors that influence borrowing costs are loan size, percentage of inventory lent, rating, and borrower identity. There is no evidence that bond short sellers have private information. Bonds with Credit Default Swaps (CDS) contracts are more actively lent than those without. Finally, the 2007 Credit Crunch does not affect average borrowing costs or loan volume, but does increase borrowing cost variance.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Financial Economics.

Volume (Year): 107 (2013)
Issue (Month): 1 ()
Pages: 155-182

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Handle: RePEc:eee:jfinec:v:107:y:2013:i:1:p:155-182

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Web page: http://www.elsevier.com/locate/inca/505576

Related research

Keywords: Short sales; Securities lending; Corporate bonds; CDS;

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References

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Citations

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Cited by:
  1. Hong, Harrison & Sraer, David, 2013. "Quiet bubbles," Journal of Financial Economics, Elsevier, vol. 110(3), pages 596-606.
  2. Loon, Yee Cheng & Zhong, Zhaodong Ken, 2014. "The impact of central clearing on counterparty risk, liquidity, and trading: Evidence from the credit default swap market," Journal of Financial Economics, Elsevier, vol. 112(1), pages 91-115.

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