Multimarket trading and the cost of debt: evidence from global bonds
Global bonds are international securities designed to be traded and settled efficiently in multiple markets. This paper studies global bonds to examine the effects of multimarket trading on corporate bond liquidity, prices, and the cost of debt. Using a sample of primary and secondary market transactions matched by issuer, I find that global bonds command a significant liquidity and price advantage over comparable domestic bonds. On average, global bonds trade at yields 15 to 25 basis points below domestic bonds of the same issuers, with the difference being greater for speculative grade bonds and in times of crisis. Global issues are more liquid, as evidenced by several trade-based liquidity measures, but the liquidity advantage of global bonds does not fully explain the yield differential. The findings imply that international corporate bond markets are not fully integrated, and global bond offerings can reduce the cost of debt. JEL Classification: G15, G12, G32, F36
|Date of creation:||Jun 2010|
|Contact details of provider:|| Postal: 60640 Frankfurt am Main, Germany|
Phone: +49 69 1344 0
Fax: +49 69 1344 6000
Web page: http://www.ecb.europa.eu/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Christian T. Brownlees & Giampiero Gallo, 2006.
"Financial Econometric Analysis at Ultra–High Frequency: Data Handling Concerns,"
Econometrics Working Papers Archive
wp2006_03, Universita' degli Studi di Firenze, Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti".
- Brownlees, C.T. & Gallo, G.M., 2006. "Financial econometric analysis at ultra-high frequency: Data handling concerns," Computational Statistics & Data Analysis, Elsevier, vol. 51(4), pages 2232-2245, December.
- Mitchell A. Petersen, 2009.
"Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches,"
Review of Financial Studies,
Society for Financial Studies, vol. 22(1), pages 435-480, January.
- Mitchell A. Petersen, 2005. "Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches," NBER Working Papers 11280, National Bureau of Economic Research, Inc.
- Darrell Duffie & Nicolae Garleanu & Lasse Heje Pedersen, 2004.
NBER Working Papers
10816, National Bureau of Economic Research, Inc.
- Darrell Duffie & Nicolae Garleanu & Lasse Heje Pedersen, 2005. "Over-the-Counter Markets," Econometrica, Econometric Society, vol. 73(6), pages 1815-1847, November.
- Darrell Duffie, 2012. "Over-The-Counter Markets," Introductory Chapters, in: Dark Markets: Asset Pricing and Information Transmission in Over-the-Counter Markets Princeton University Press.
- Alexander, Gordon J. & Edwards, Amy K. & Ferri, Michael G., 2000. "The determinants of trading volume of high-yield corporate bonds," Journal of Financial Markets, Elsevier, vol. 3(2), pages 177-204, May.
- Long Chen & David A. Lesmond & Jason Wei, 2007. "Corporate Yield Spreads and Bond Liquidity," Journal of Finance, American Finance Association, vol. 62(1), pages 119-149, 02.
- Ho, Thomas S Y & Stoll, Hans R, 1983. " The Dynamics of Dealer Markets under Competition," Journal of Finance, American Finance Association, vol. 38(4), pages 1053-1074, September.
- Amy K. Edwards & Lawrence E. Harris & Michael S. Piwowar, 2007. "Corporate Bond Market Transaction Costs and Transparency," Journal of Finance, American Finance Association, vol. 62(3), pages 1421-1451, 06.
- Hans R. Stoll, "undated".
"The Pricing of Security Dealer Services: An Empirical Study of NASDAQ Stocks,"
Rodney L. White Center for Financial Research Working Papers
13-77, Wharton School Rodney L. White Center for Financial Research.
- Stoll, Hans R, 1978. "The Pricing of Security Dealer Services: An Empirical Study of NASDAQ Stocks," Journal of Finance, American Finance Association, vol. 33(4), pages 1153-1172, September.
- Goyenko, Ruslan Y. & Holden, Craig W. & Trzcinka, Charles A., 2009. "Do liquidity measures measure liquidity?," Journal of Financial Economics, Elsevier, vol. 92(2), pages 153-181, May.
When requesting a correction, please mention this item's handle: RePEc:ecb:ecbwps:20101212. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Official Publications)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.