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New Measures of Australian Corporate Credit Spreads

Author

Listed:
  • Ivailo Arsov

    (Reserve Bank of Australia)

  • Matthew Brooks

    (Reserve Bank of Australia)

  • Mitch Kosev

    (Reserve Bank of Australia)

Abstract

Australian corporations access bond markets both domestically and offshore. Despite this, there is a lack of publicly available data on bond market conditions faced by non-financial corporations (NFCs). This gap in the data is particularly apparent at longer maturities where the low level of bond issuance, especially in the domestic market, makes it difficult to gauge the long-term credit spreads faced by resident issuers. To address this lack of data, the article presents a method for estimating aggregate credit spreads of Australian NFCs across maturities ranging from 1 to 10 years. The estimation method is simple, transparent and relatively robust in small samples. The Bank will commence publishing the estimated credit spreads monthly from December 2013.

Suggested Citation

  • Ivailo Arsov & Matthew Brooks & Mitch Kosev, 2013. "New Measures of Australian Corporate Credit Spreads," RBA Bulletin, Reserve Bank of Australia, pages 15-26, December.
  • Handle: RePEc:rba:rbabul:dec2013-03
    as

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    File URL: http://www.rba.gov.au/publications/bulletin/2013/dec/pdf/bu-1213-3.pdf
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    References listed on IDEAS

    as
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    2. Eric Powers & Sergey Tsyplakov, 2008. "What Is the Cost of Financial Flexibility? Theory and Evidence for Make-Whole Call Provisions," Financial Management, Financial Management Association International, vol. 37(3), pages 485-512, September.
    3. Qi Li & Jeffrey Scott Racine, 2006. "Nonparametric Econometrics: Theory and Practice," Economics Books, Princeton University Press, edition 1, number 8355, June.
    4. Linton, Oliver & Mammen, Enno & Nielsen, Jans Perch & Tanggaard, Carsten, 2001. "Yield curve estimation by kernel smoothing methods," Journal of Econometrics, Elsevier, vol. 105(1), pages 185-223, November.
    5. Nelson, Charles R & Siegel, Andrew F, 1987. "Parsimonious Modeling of Yield Curves," The Journal of Business, University of Chicago Press, vol. 60(4), pages 473-489, October.
    6. Yallup, Peter J., 2012. "Models of the yield curve and the curvature of the implied forward rate function," Journal of Banking & Finance, Elsevier, vol. 36(1), pages 121-135.
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