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Developments in Corporate Bond Spreads at Issuance

Author

Listed:
  • Kaori Ochi

    (Bank of Japan)

  • Mitsuhiro Osada

    (Bank of Japan)

Abstract

Firms' financing environment in terms of commercial paper, corporate bond, and bank lending is one of the spillover channels of monetary policy. In particular, this article overviews the recent developments in corporate bond spreads in the primary markets, focusing mainly on the period from mid-2022 to early 2023 when we witnessed the spread widening. A quantitative time-series analysis using issue-by-issue data suggests that the widening of corporate bond spreads was caused by (1) increased demand for working capital in response to rising commodity prices and (2) spillover effects of tightening foreign financial conditions, reflecting monetary policy tightening by foreign central banks, and was likely affected by (3) a decline in the degree of functionality of the Japanese government bond (JGB) market.

Suggested Citation

  • Kaori Ochi & Mitsuhiro Osada, 2023. "Developments in Corporate Bond Spreads at Issuance," Bank of Japan Review Series 23-E-8, Bank of Japan.
    • Handle: RePEc:boj:bojrev:rev23e08
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    More about this item

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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